Colonial BancGroup looks to 'avoid and invalidate' FDIC obligations

By Caroline Salls

Pittsburgh, Dec. 16 - The Colonial BancGroup, Inc. filed a lawsuit Tuesday against Colonial Bank receiver the Federal Deposit Insurance Corp. in an effort to "avoid and invalidate as a fraudulent obligation" amounts allegedly owed to the FDIC, according to a filing with the U.S. Bankruptcy Court for the Middle District of Alabama.

According to the company's complaint, the FDIC claims that in January 2009 and June 2009, Colonial BancGroup incurred substantial obligations to maintain the capital of Colonial Bank under a memorandum of understanding and/or a cease and desist order that it was deemed to have assumed under bankruptcy law.

As a result, the company said it was allegedly obligated to immediately cure any deficit, and the FDIC is entitled to a priority claim for the cure amount.

However, Colonial said it believes that the court will find that the claims asserted by the FDIC are without merit, because the agency does not have standing to enforce any of the obligations under the memorandum of understanding or the cease and desist order, and because the company has not entered into any commitment to a federal depository institution regulatory agency to maintain the capital of Colonial Bank.

The complaint did not specify the amount of the company's alleged obligations.

Colonial BancGroup is the Montgomery, Ala.-based holding company for Colonial Bank. The company filed for bankruptcy on Aug. 25. Its Chapter 11 case number is 09-32303.

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