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For the third time since August, the Federal Deposit Insurance Corp. has been sued in federal court over allegations that the agency mishandled its role as receiver of an ailing financial institution. In a complaint filed Monday in the U.S. District Court for the District of Columbia, BHC Interim Funding II L.P. and BHC Interim Funding III L.P., which together filed the suits as BHC, argue that the FDIC improperly seized control of a financial services company that BHC had loaned money to and that because of the allegedly improper seizure, BHC lost out on more than $15 million in assets. According to the complaint, in 2008 BHC extended two secured loans to Affinity Financial Corp., each of which was guaranteed by Waterfield Financial Services and secured by the assets of both Affinity and WFS. Those assets primarily included contract rights that gave WFS the authority to act as an agent for a pool of customer deposit accounts with various commercial banks. These agreements generated “substantial” monthly fees for WFS, the complaint says. In March 2010, at the direction of the Office of Thrift Supervision and the FDIC, WFS was forced to turn over its contract rights to those deposit accounts to Waterfield Bank, an affiliated entity that had allegedly become undercapitalized. The complaint says that as the lender, BHC did not consent to that arrangement. On March 5, three days after the OTS and the FDIC directed WFS to turn over the assets to Waterfield, the OTS seized control of Waterfield and named the FDIC its receiver. Shortly after being named receiver, the complaint says, the FDIC cancelled the pooled deposit accounts, which had been collecting fees used to pay BHC back for the loans it had extended, and then returned those deposits to individual customers. BHC contends in its complaint that the assignment of WFS’ assets to Waterfield was not valid because BHC never consented to the agreement, the decision was made without consideration for how WFS would be able to repay its debt and because the arrangement violated BHC’s loan agreements. The complaint asks that the judge presiding over the case order the FDIC to repay the $15 million BHC had loaned to Affinity and that BHC be awarded other compensatory damages. BHC is being represented by Blank Rome partner Paul Honigberg. No lawyers have entered an appearance on behalf of the FDIC. In August, Philadelphia-based Pepper Hamilton sued the FDIC, alleging that it had tried to improperly downgrade legal fees the firm charged to a Utah bank before the bank was placed in an FDIC receivership. Pepper Hamilton is being represented by Matthew Foster, a Washington-based associate at that firm. Also in August, JPMorgan Chase & Co. filed suit against the FDIC, alleging that the agency, which is acting as receiver for now-defunct AmTrust Bank, improperly denied JPMorgan’s effort to recoup losses it suffered when AmTrust went under. JPMorgan is being represented by Joel Cohen, a New York-based partner at Davis Polk & Wardwell. Jeff Jeffrey can be contacted at [email protected].

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