The Justice Department sued a Chicago banking company Thursday, accusing it of submitting false insurance claims on defaulted student loans.

The suit, filed in U.S. District Court in Chicago, charges that Corus Bankshares violated the Federal False Claims Act by seeking reimbursement for thousands of defaulted loans that "were not serviced in accordance with federal regulations."

The bank improperly collected $11.8 million, the government said.

Corus said in 1994 that some employees, who were later fired, falsified records. But the company maintains that it was not required to keep records on every delinquent loan.

"We think we have substantial legal defenses," said Robert J. Glickman, president and chief executive officer at $2.3 billion-asset Corus. The company continues to make student loans and has a $400 million student loan portfolio.

The violations were alleged to have occurred between 1988 and 1994, when Corus was known as River Forest Bancorp. During those years the bank's student loan portfolio jumped to $297 million from $88.5 million, according to the U.S. Department of Education.

The suit is seeking more than $35 million in damages, plus $10,000 for each allegedly false claim submitted. No trial date has been set. The investigation took five years to complete.

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