Treasury Probes Bank Payout to Ex-CEO

Updated from 12:57 p.m. EST

The Treasury Department says it is reviewing official concerns about the timing and circumstances of a more than $12 million retirement package awarded the ex-CEO of South Carolina's largest bank.

The acknowledgement comes several days after The South Financial Group (TSFG Quote) said it had received preliminary approval for a $347 million investment from the Troubled Asset Relief Program, or TARP, which puts restrictions on pay for executives of banks that receive investments. TheStreet.com first reported ex-CEOMack Whittle's earlier-than-expected retirement on Oct. 29, prompting South Carolina Gov. Mark Sanford, a Republican, to request in a Nov. 7 letter that Treasury investigate the situation.

"Treasury has received the letter and we are currently reviewing it," wrote spokeswoman Jennifer Zuccarelli, in an email message to TheStreet.com .

Zuccarelli did not respond to follow-up questions from TheStreet.com asking whether the Treasury Department was aware of Sanford's letter when it granted preliminary approval to the bank for the investment, or whether it was aware of another letter raising similar concerns sent by Rep. Bob Inglis (R., S.C.). The South Financial Group announced the government's approval of the investment on Nov. 14.

"We get lots of correspondence," Zuccarelli said in an initial telephone conversation on Wednesday when TheStreet.com asked about the letter.

In a letter to Treasury dated Nov. 12, Whittle defended his retirement package, pointing out it had been negotiated before the TARP was even in existence. He expressed a willingness to modify the arrangement if it jeopardized the bank's application for funds.

"If the only item standing in the way of TSFG's receipt of a TARP capital allocation is my retirement agreement, then I am willing to discuss with the Treasury and the company the aspects of my agreement that are in excess of the current TARP limitations and in good faith mutually agree to something that allows the TARP investment to be made," Whittle wrote.