Colonial Bank receiver FDIC asks court to dismiss tax refund lawsuit

By Caroline Salls

Pittsburgh, July 25 - Colonial Bank receiver the Federal Deposit Insurance Corp. has asked the U.S. District Court for the Middle District of Alabama to dismiss a lawsuit filed by bank holding company The Colonial BancGroup, Inc. regarding the ownership of tax refunds, according to a Friday court filing.

Specifically, the FDIC said Colonial BancGroup has asked the district court to determine ownership of income tax refunds and insurance policy proceeds.

According to Colonial BancGroup's lawsuit, the company received a $166 million tax refund in June 2009, which was transferred to Colonial Bank.

Because the lawsuit seeks a ruling related to the assets of a bank for which the FDIC has been appointed receiver, the agency said the district court does not have jurisdiction.

The FDIC said the only forum for deciding the asset ownership dispute would be under a separate lawsuit filed by Colonial BancGroup for determination of disallowed receivership claims under the Financial Institutions Reform, Recovery and Enforcement Act of 1989.

This act establishes an exclusive administrative process for the assertion of claims related to a failed bank or the FDIC as its receiver.

The FDIC said the act does not give courts jurisdiction over any claim that is filed outside of an exclusive receivership claims process.

Colonial BancGroup is the Montgomery, Ala.-based holding company for Colonial Bank. The company filed for bankruptcy on Aug. 25, 2009 in the U.S. Bankruptcy Court for the Middle District of Alabama. Its Chapter 11 case number is 09-32303.

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