The South Financial Group ( TSFG) on Friday said it had received preliminary approval for $347 million in federal aid, despite controversy surrounding a $12 million golden parachute for its former CEO.

The South said the federal government had accepted its application for preferred equity investment from the government just a week after South Carolina Gov. Mark Sanford wrote a letter to Treasury Secretary Henry Paulson warning him that the bank appeared to be playing fast and loose with the rules.

The Greenville, S.C., bank's founder and ex-CEO Mack Whittle unexpectedly moved up his retirement date last month just as the bank said it was applying for the government investment, which has claw back provisions that prevent executives from being rewarded for poor performance. TheStreet.com reported the circumstances on Oct. 29, before Sanford questioned it in his Nov. 7 letter.

Whittle, who had earlier announced plans to retire at the end of the year, walked away with a golden parachute worth at least $12 million, even though the bank's shares have fallen from $25 last year to as low as $2.48 Wednesday. Some reports have calculated Whittle's exit package to be worth as much as $18 million. In 2006, SNL Financial named Whittle one of America's most overcompensated bank executives.

Sterne Agee analyst Adam Barkstrom called the timing of Whittle's retirement, "precarious as hell."

Calls to spokespeople for Sanford, the U.S. Treasury and The South Financial Group were not immediately returned Friday afternoon.

Nine of the nation's largest banks, including Bank of America ( BAC), JPMorgan Chase ( JPM), Citigroup ( C) and Wells Fargo ( WFC), agreed to an initial round of investments last month.

A host of regional banks, including PNC Financial Services ( PNC) and KeyCorp ( KEY), have disclosed investments this week. Banks have until Nov. 14 to apply and, if accepted, agree to join the program.