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Doral Files Appeal With Puerto Rico Supreme Court

Stocks in this article: DRL

SAN JUAN, Puerto Rico, June 18, 2014 /PRNewswire/ -- This morning, Doral Financial Corporation filed papers appealing a decision by the Court of First Instance in Puerto Rico and asking the Puerto Rico Supreme Court to assume jurisdiction of the appeal.

"The Department of Treasury's unilateral decision to nullify its binding agreement with Doral has already caused enormous harm to Doral, and the possibility that Doral could be forced to defend that agreement in the Department of Treasury's own administrative process risks even further harm," said Doral's counsel Matthew McGill, a partner with Gibson, Dunn & Crutcher. 

McGill continued, "Doral is entitled to a court hearing to determine the validity of the agreement, not biased review by the very entity that declared the agreement 'null.'  We are hopeful that the Supreme Court will promptly correct the Court of First Instance's errors so that this dispute can be brought to a prompt conclusion and the 'binding and final' agreement upheld."

On Monday, the Court of First Instance issued an opinion concluding that the Department of Treasury had improperly attempted to invalidate a binding tax agreement with Doral.  According to the court, the Department of Treasury did not identify a proper legal basis for invalidating the agreement.  Despite this conclusion, however, the Court of First Instance gave the Department of Treasury another opportunity to decide whether the agreement is binding. If the Department of Treasury decides the agreement is not binding, under the decision by the Court of First Instance, Doral must litigate that dispute through the Department of Treasury's own administrative process.

On March 26, 2012, Doral entered into an agreement with the Department of Treasury, in which the parties agreed to treat Doral's right to claim approximately $766 million in deductions over the next eleven years as equivalent to a tax overpayment of $229 million.  By its terms, the agreement was "final and conclusive," and could "not be reopened, annulled, modified, set aside or disregarded" unless specific, enumerated conditions were satisfied.  Nonetheless, on May 14, 2014, the Department of Treasury announced that it had declared the agreement "null" and would refuse to honor (and thus refund) Doral's overpayment.

Previously, Doral has expressed concern over potential retaliation by state agencies for pursuing its rights to enforce the 2012 agreement.

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