A federal judge is siding with the bankruptcy trustee of the failed IndyMac Bancorp Inc. in his dispute with the Federal Deposit Insurance Corp. over the rights to $55 million in disputed tax refunds.
Judge Sheri Bluebond of the U.S. Bankruptcy Court in Los Angeles granted summary judgment to Alfred Siegel, the bankruptcy trustee overseeing the liquidation of IndyMac Bancorp, in his dispute with the FDIC, saying he "is entitled to immediate payment, possession, and ownership of all refunds." The FDIC, which took over the holding company's subsidiary IndyMac Bank as receiver in 2008, had claimed the refunds as its own.
"The court does not believe this to be as hard a case as it may appear," Bluebond said in a 71-page report filed March 29. "The tax refunds at issue are property of Bancorp's bankruptcy estate, and the FDIC has the ability to assert an unsecured claim under the [tax-sharing agreement] subject to resolution in the claims allowance process."
In determining the relationship between the IndyMac Bancorp and its former thrift was equal to that of a debtor and creditor, Bluebond rejected the FDIC's argument that most of the net operating losses were caused by the bank and thus the tax refunds belonged to it as receiver.
A spokesman for the FDIC declined to comment.
The bankruptcy judge's determination isn't a final ruling but rather a recommendation to the U.S. District Court. That designation is the result of last year's Supreme Court decision in Stern v. Marshall, which curtailed bankruptcy judges' authority to rule on certain issues.
Still, it will surely draw the attention of other creditors of other bank-holding companies sparring with the FDIC in courtrooms across the country, spawned by the hundreds of bank closures by regulators in recent years.
Indeed, lawyers representing the remnants of Colonial BancGroup Inc. have noted the IndyMac recommendation in their fight with the FDIC over $253 million in disputed tax refunds.
IndyMac was once among the largest mortgage lenders in the country, specializing in high-risk loans known as Alt-A mortgages. Based in Pasadena, Calif., the company was at the center of the housing market's collapse and faced ballooning losses starting in 2007.
The banking operations, now known as OneWest Bank FSB, are under the control of a new ownership group, whose members include hedge-fund managers John Paulson and George Soros along with Dell Inc. (DELL) CEO Michael Dell.
The FDIC has been in control of IndyMac's former thrift since authorities seized it in the summer of 2008. IndyMac Bancorp filed for Chapter 7 protection in July of that year to liquidate its assets after the bank was seized. At the time of the bank's takeover by the FDIC, it was the third-largest bank failure in U.S. history. The FDIC has estimated IndyMac's failure will cost its deposit insurance fund $13 billion.