Articles Tagged with Virgin Islands

Chicago-based Stoltmann Law Offices has represented investors who’ve suffered losses from risky municipal bonds. One of the most troubling investments for investors has been bond mutual funds and single municipal bonds issued by Caribbean territories like Puerto Rico. The island was devastated by Hurricane Maria and a debt crisis. The island’s government, which issued billions in municipal bonds, filed for bankruptcy, which forced bondholders to take losses. Like Puerto Rico, the neighboring Virgin Islands may be facing a debt meltdown of its own.

The U.S. Virgin Islands, also severely damaged by two hurricanes in recent years, is also dealing with an ongoing debt crisis. With only about 100,000 inhabitants spanning three Caribbean Islands, the U.S. protectorate had been issuing high-yield municipal bonds in recent years to fund essential government services such as a power utility. The government owes more than $6.5 billion to creditors, which averages some $19,000 per resident. In addition, the islands have billions in unfunded pension and healthcare obligations. That’s one of the highest per-capita debt loads in the Western Hemisphere.

The debt explosion in the Virgin Islands has gone from bad to worse. Three years ago, credit ratings agencies slashed the ratings on government bonds to junk status. While that made the bonds’ yields more attractive (they rose), it also indicated a higher risk of default. As a result, prices on those issues dropped.

AdobeStock_112181284-1-300x200Are you a Wisconsin resident and were you sold U.S. Virgin Islands bonds by your Wells Fargo broker? If so, those losses you sustained with Wells Fargo may be recoverable through the Financial Industry Regulatory Authority (FINRA) arbitration process. We are securities attorneys based in Chicago and sue firms like Wells Fargo on a contingency fee basis because the firm may be liable for investment losses. If your Wells Fargo broker sold you these bonds, please call 312-332-4200 today to speak to an attorney for a no-cost, no-obligation consultation to find out how you can bring a claim against the firm.

Brokers have an ironclad obligation to only recommend and sell bonds that are suitable for investors, and the U.S. Virgin Islands bonds were high-risk and illiquid investments, which are not suitable for many investors. According to a recent Wall Street Journal article, the mutual fund with the highest percentage of Virgin Islands debt is made up largely of Wisconsin investors, because Wells Fargo Asset Management, which oversees the Wells Fargo Wisconsin Tax Free C Fund, is protecting itself from the situation by holding that that is insured or coming due within the next 18 months. More than 8% of its holdings is Virgin Islands debt. The bonds were recently downgraded further to junk bond status.

Much like Puerto Rico, the Virgin Islands are struggling with a declining population, declining tourism, high levels of debt and pension obligations. These debt problems were exacerbated after the 2008 market crash. And in 2012, the Hovensa oil refinery on St. Croix shut down. This was one of the territory’s biggest employers, employing over 2,000 people. Because of the drop in revenue, this caused the territory to increasingly rely on bond proceeds to pay operating costs, while contributing less to pension plans. Currently, there is $2.2 billion in debt obligations.

The Financial Industry Regulatory Authority (FINRA) is investigating Merrill Lynch because of its alleged failure to detect the activities of a former financial advisor, Gary Yin. Yin pleaded guilty to helping a client cover up an insider-trading scheme and money laundering scheme in 2012. He managed over $200 million in assets at a Merrill Lynch San Diego office, and pleaded guilty to conspiring to obstruct justice and launder money. He is to be sentenced today. Yin also allegedly altered records in Merrill Lynch’s computer system to distance himself from illicit trades, lied to Merrill compliance employees and created Virgin Islands shell companies to “conceal stock transactions from Merrill Lynch and others,” according to his plea agreement. Yin was registered with Merrill Lynch from September 1994 until May 2013. He is no longer licensed within the industry. If you invested money with Gary Yin, please call our securities law firm based in Chicago at 312-332-4200 to speak with an attorney. Because Merrill Lynch did not supervise Yin properly, you may be entitled to recover investment losses.

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