Louisiana disclosed this week that it has been providing information to the Internal Revenue Service for the last 13 months as part of an ongoing audit of $650 million of general obligation refunding bonds it sold in 2005.
Since the IRS initiated the audit on March 25, 2009, the state has responded to three separate requests for information, according to a material event notice the state filed late Monday with the Municipal Securities Rulemaking Board’s Electronic Municipal Market Access system.
State officials contend the audit is random, but temporarily postponed the refunding of $500 million of outstanding state GO bonds last week until the examination is completed.
The Louisiana State Bond Commission unanimously decided to delay the refunding, and directed staff to quickly provide all the information requested by the IRS in an effort to conclude the audit as soon as possible.
According to the state’s notice, the IRS initially asked for information regarding a number of basic documents and facts about the bonds, which refunded debt sold between 1995 and 2004.
They include a copy of the bond transcript, the schedule of interest expenses paid, any contracts for financial derivatives entered into in connection with the bonds, an explanation of how the bond proceeds were allocated, a list of initial bondholders, and copies of any bond yield computations.
The state provided that information one day after the request.
When the IRS came calling a second time, on Aug. 20, it asked for more information. Its requests included a listing of the non-state entities and elected officials that were provided funds from the refunded bonds, copies of confirmation slips and all documents related to the purchase of escrow securities, and any trustee statements from the date of issuance to current time that reflected activity on the escrow account.
Louisiana provided that information on Oct. 15.
Most recently, the service has asked for additional information about specific projects that were not identified in the notice.
The IRS requested a list of owners of the properties; copies of all leases, management, or research contracts; any documentation if ownership of the properties had changed, and brief descriptions of the projects financed with bond proceeds that detail how the assets were used.
That request was made on Dec. 28, and the state replied on April 2.
Charles C. Foti Jr., the attorney general at the time, served as co-bond counsel on the deal alongside four firms — Jones, Walker Waechter, Poitevent, Carrera & Denegre LLP, the Godfrey Firm PLC, the Law Office of Harry E. Cantrell Jr. APLC, and Nixon Peabody LLP.
Citi was the lead underwriter for the bonds. Co-underwriters included: Lehman Brothers, since acquired by Barclays Capital, Morgan Stanley, Dorsey & Co., JPMorgan, Morgan Keegan, and Siebert Brandford Shank & Co. MBIA Insurance Corp. provided bond insurance on the deal. Government Finance Associates Inc. was financial adviser.
