U.S. Bank Battles Federal Gov’t for Borrower’s Assets
Minneapolis-based U.S. Bank is reportedly in a battle with the federal government as it attempts to hang on to more than $5 million that it recovered from an insolvent borrower.
At the center of the case is Adaptive Micro Systems, a Milwaukee-based maker of electronic display systems that was sold in receivership, according to a report by the Milwaukee Journal Sentinel. (The company was taken over by new owners, and the case involves the previous ownership.)
U.S. Bank, in a federal lawsuit filed in Milwaukee earlier this month, reportedly claims that Adaptive Micro Systems owed it nearly $16 million. The loans were secured, meaning Adaptive Micro Systems’ assets were to be assumed by the bank if the company defaulted.
When the company failed to meet its obligations to U.S. Bank, a receiver sold its assets, reportedly allowing the bank to recover almost $5.3 million. But the Department of Homeland Security’s Customs and Border Protection agency has said that it is entitled to recover that money, because the company owes the government for unpaid customs duties and penalties, and the government is given priority in such situations, the Milwaukee Journal Sentinel reported.
James Friedman, chairman of the financial institutions practice group for the law firm Quarles & Brady, told the newspaper that, if U.S. Bank loses the fight, it could have negative ramifications for lenders: “For the government to be able to somehow override priority rights established under state law would be very disconcerting to lenders,” he said.
To read the full report in the Milwaukee Journal Sentinel, click here.