Breaking ranks with other banks ensnared in an alleged loan scam, CoreStates Financial Corp. Tuesday sued Signet Banking Corp. to recover the $17.9 million it may have lost in a $324 million loan participation led by Signet.

CoreStates, in the suit filed in U.S. District Court in Philadelphia, seeks $18 million in damages and attorneys' fees from Signet, charging that the Richmond, Va.-based bank encouraged it to make the $19.1 million loan and then agreed to "indemnify" it against inaccuracies or misrepresentations.

Signet has maintained that six other lenders, including CoreStates, were obliged to conduct their own due diligence on the credit that Signet initiated.

The seven banks loaned $323.5 million over two years to a company that represented itself as working on a secret project for Philip Morris Cos., the well-known tobacco giant.

On March 19, federal investigators arrested former Philip Morris employee Edward J. Reiners and charged him with bank fraud in connection with the loans.

Although Mr. Reiners had kept up his payments on the credit, $254 million remained outstanding at the time of his arrest.

Federal agents subsequently located about $200 million in bank accounts held by Mr. Reiners, money the seven lenders expect will eventually be returned to them.

The move by CoreStates came the day after Signet asked a federal judge in Richmond to guide it on how an estimated $200 million in recoveries in the case should be distributed to the seven lenders.

Signet wants a pro rata distribution, in which banks would receive compensation based on their shares in the loan.

A spokesman for Philadelphia-based CoreStates declined to comment on his bank's lawsuit. A Signet spokeswoman said none of the other five lenders in the case, to her knowledge, had emulated CoreState's action, but she declined to comment otherwise.

According to the Baltimore Sun, CoreStates claims in its complaint that Signet needed other banks to be involved in the deal because it was near its legal lending limit with Mr. Reiners' company.

CoreStates also claims that Signet was worried NationsBank Corp. "was trying to take over Signet's relationship" with the borrower.

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