(Recasts, adds quote from Doral lawyer)
Feb 25 (Reuters) - Doral Financial Corp said on Wednesday it intends to fight an appeals court ruling that overturned a lower court decision to grant the embattled lender a $229 million tax refund that was contested by Puerto Rico's Treasury Department.
The ruling is a further blow to Doral at a time when the Federal Insurance Deposit Corporation (FDIC), the U.S. bank regulator, has raised concerns about the health of the bank.
On Jan. 26, the FDIC issued a Prompt Corrective Action Directive ordering the bank to increase its capital within 30 days to a level where it would be considered "adequately capitalized." That timeframe expires Friday.
"We intend to appeal immediately to the Supreme Court of Puerto Rico," said Doral's counsel Matthew D. McGill of Gibson, Dunn & Crutcher. "The decision of the court of appeals seriously degrades the rule of law by empowering the government to disregard contracts on little more than a whim."
The $229 million tax refund results from a restatement of earnings during a six-year period from 1998 to 2004. Puerto Rico Treasury officials said they voided the agreement because it was never recognized in government accounting books and because the statue of limitations had run out on the refund. They also cited discrepancies in Doral's financial documents. (Reporting by Sudarshan Varadhan and Edward Krudy; Editing by Lisa Shumaker and Ken Wills)