IndyMac negotiates FDIC deal to regain $58.6 million of tax refunds

By Kali Hays

New York, Nov. 6 – IndyMac Bancorp, Inc. Chapter 7 trustee Alfred H. Siegel is seeking approval of a settlement agreement with the Federal Deposit Insurance Corp. (FDIC) that will allow the company to regain control of $58.59 million in tax refunds, according to a Nov. 5 motion with the U.S. Bankruptcy Court for the Central District of California.

In July 2008, the company was placed into receivership with the FDIC and Siegel filed an adversary proceeding against the receiver in 2009 in an attempt to dismiss or subordinate the FDIC’s claim against the company “in excess of $5 billion” related to pre-bankruptcy state tax refunds obtained by the estate.

According to Siegel, the proposed settlement is “a comprehensive resolution of numerous, longstanding disputes between the trustee and the FDIC-Receiver,” and both parties have agreed to withdraw all pending litigation.

Specifically, the trustee will receive exclusive control of a tax escrow account consisting of $58.59 million in tax refunds and accrued interest. In addition, the FDIC agreed to turn over any future tax refunds to the account.

In return, the FDIC will have an allowed priority claim against the estate in the amount of $58.36 million, representing the principal amount of the tax refunds.

Siegel said he intends to use the refunds to ensure a recovery to unsecured creditors and said the settlement is in the best interest of the estate as “the anticipated benefits of pressing forward with the adversary proceeding are highly uncertain, come at a potentially steep cost and ensure material delay.”

A hearing to consider the settlement is set for Dec. 3.

IndyMac, a Pasadena, Calif., bank holding company, filed for bankruptcy on July 31, 2008. The Chapter 7 case number is 08-21752.

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