The Colonial BancGroup, Inc. filed for Chapter 11 bankruptcy on August 25, 2009 with the United States Bankruptcy Court for the Middle District of Alabama. Colonial is the target of a criminal probe and its Florida offices were raided in a criminal investigation related to Colonial’s application for TARP funding. Colonial’s banking operations were recently taken over by the FDIC. A portion of Colonial’s banking assets were acquired by BB&T Corporation, with significant support and guarantees by the FDIC totalling over $14 billion.
In its Chapter 11 petition (pdf) Colonial identified $45 million in assets and debts of $380 million. Colonial’s FDIC takeover is the largest since Washington Mutual Inc. was taken over last year. The United States Department of Justice is investigating accounting irregularities at Colonial. A significant portion of Colonial’s losses stem from defaulted property and construction loans in Florida.
In addition, lender Taylor Bean also recently filed for bankruptcy in Florida. Colonial and Taylor Bean worked together on obtaining TARP funding from the U.S. government, which now is being investigated by the DOJ. The U.S. Securities and Exchange Commission also has issued subpoenas to Colonial, demanding documents concerning Colonial’s accounting for its participation in the TARP program and Colonial’s loan loss reserves.