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Updated from 11:23 a.m. EDT

Federal prosecutors probing municipal corruption in Philadelphia might not be finished looking into potential wrongdoing at

Commerce Bancorp

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Prosecutors, in a court filing, say the fast-growing New Jersey bank "remains a subject of ongoing criminal and civil investigations." The filing could contradict a recent claim by Commerce Bank officials that the Cherry Hill-based company is no longer the focus of a criminal inquiry.

The news that the investigation may not be over, which was first reported by

The Philadelphia Inquirer

, sent investors scurrying again. In midday trading, shares of Commerce were down $1.50, or 2.9%, to $50.79, their lowest price in nearly eight months.

Prosecutors disclosed their continuing interest in a request to hold a hearing to determine whether the bank is paying the legal fees of two Commerce officials who have been charged in the scandal. Federal authorities contend that there may be a conflict of interest in Commerce paying the bankers legal expenses, if it deters "these defendants' potential cooperation with the government."

Speaking at bank conference call two weeks ago, Michael Critchley, the high-powered criminal defense lawyer representing Commerce, said: "The bank has not been charged with any wrongdoing, nor will it be charged with any wrongdoing." The West Orange, N.J., lawyer, who also is a director of one of Commerce's regional banking subsidiaries, described the investigation by federal prosecutors as having been "terminated."

The strong statements by Critchley helped stop the bleeding in Commerce shares, which lost roughly 18% after two executives of the bank's Pennsylvania subsidiary were indicted in late June for their alleged role in a Philadelphia influence-peddling scheme. Prosecutors have charged Glenn Holck, president of Commerce Bank/Pennsylvania, and Stephen Umbrell, a vice president of the subsidiary, with being part of a criminal conspiracy to arrange special loans for a former Philadelphia official, who in turn awarded lucrative bond underwriting and other banking deals to Commerce.

The Commerce bankers were indicted along with 10 other people, including former Philadelphia Treasurer Corey Kemp, local attorney Ronald White and former bankers with

J.P. Morgan Chase

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Janney Montgomery Scott

. White, the alleged lynchpin of the influence-peddling scheme, was a director of Commerce's Pennsylvania banking subsidiary and received $182,000 in consulting fees from the bank, according to prosecutors.

Prosecutors contend they have reason to believe that Commerce, J.P. Morgan Chase and Janney Montgomery are paying the legal fees of their respective current and former employees. Authorities contend the hearing is necessary to inform the defendants of "the potential conflicts of interest in continuing to be represented by counsel who are being paid by third parties."

Ironically, Janney Montgomery analyst Claire Percarpio downgraded Commerce to sell from hold Tuesday, cutting her price target to $45 from $52.

Commerce spokesman David Flaherty confirmed that the bank is paying the legal expenses for its employees, who have been suspended from their jobs. Flaherty said there is no discrepancy between Critchley's earlier statement and the comments from prosecutors in the court filing.

"I don't think anything that has transpired is different from what

Critchley said," Flaherty said.

Kevin Marino, the attorney for Holck, also defended Critchley's assessment of the inquiry. Marino once again asserted his client's innocence and called the charges "pretty outrageous."

Both Holck and Umbrell have pleaded not guilty to the charges against them.

"It's pretty obvious they are attempting to convince individuals to cooperate," said Marino. "But the problem with cooperation is it would not be terribly helpful. My client did nothing wrong."

The request for a potential conflict hearing is not unusual in an ongoing criminal investigation. But the motion papers filed by prosecutors do not specifically refer to either J.P. Morgan or Janney Montgomery as being the "subject" of an ongoing criminal investigation.

During the conference call, Commerce officials also said they had no information on the status of an informal

Securities and Exchange Commission

investigation into the bank's past political contributions to municipal officials. The bank, which had been a heavy contributor to local politicians in New Jersey, stopped making political donations early last year.

Commerce also used the conference call to announce it was getting out of the municipal bond underwriting business, even as they insisted the bank had done nothing wrong in Philadelphia. Critics of the bank are worried that the Philadelphia inquiry ultimately could implicate others at the bank and cause local governments to pull their deposits from Commerce's branches.

The bank currently has banking relationships with about 1,000 governmental entities in four states. Government deposits account for 16% of Commerce's $23 billion in total deposits. Over the past year, the amount of money deposited by governmental entities with Commerce branches has risen by 64%.