FDIC seeks to block Corus parent from tax refunds

By Dow Jones Newswires
Posted Aug. 17, 2010 at 6:05 p.m.

The Federal Deposit Insurance Corp. is seeking to block the parent of failed Corus Bank from recouping more than $257 million in tax refunds stemming from the bank’s collapse.

In papers filed Monday with the U.S. Bankruptcy in Chicago, the FDIC, the receiver of the closed Illinois bank, said Corus Bankshares Inc.’s lawsuit against the regulator that seeks to take back those refunds should be tossed out because it intentionally sidesteps federal banking laws.

“Because federal law expressly precludes” the lawsuit Bankshares filed in bankruptcy court, “this action should be dismissed,” the FDIC said in court papers.

The FDIC took over Corus Bank in September 2009 after regulators seized its assets. The bank holding company subsequently filed for Chapter 11 protection in June.

Tax refunds are available to the bank because losses tracked to its failure and seizure can be counted against years of taxes paid when the lender profited from the building boom.

Corus Bankshares says it is entitled to those funds. The refunds would provide some cash to repay creditors, including bondholders owed more than $416 million.

The FDIC, however, could lay claim to the tax refunds as it tries to find money to pay creditors of the thrift.

Even before its bankruptcy filing, Corus Bankshares filed a claim with the FDIC for the tax refunds. The FDIC denied that claim in June.

Shortly after, Corus Bankshares filed the lawsuit in bankruptcy court demanding the refunds.

The FDIC says the bankruptcy court has no ability to rule on such a lawsuit. Federal banking law mandates that decisions made in the receivership process can only be appealed to a district court, the agency said.

In a seemingly related move, the bank holding company filed a second lawsuit against the FDIC Monday in bankruptcy court.

In that lawsuit, Corus Bankshares seeks to again lay claim to the tax refunds as well as other assets, including a portion of the proceeds from FDIC’s sale of Corus Bank’s branches and MB Financial Inc. deposits.

Following the bank’s seizure, the FDIC transferred to MB Financial some $7 billion in deposits and 11 branches.

The FDIC later sold most of Corus Bank’s remaining assets, including construction loans, to a group of investors that included Starwood Capital Group.

Corus Bank had lent heavily to condominium development projects and suffered when the housing market crumbled.

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