Sumner County is seeking the repayment of tax dollars from Fifth Third Bank after the Cincinnati-based bank and the Industrial Development Board of the City of Hendersonville allegedly entered into an illegal interest rate swap agreement.

Sumner County filed suit against Fifth Third in federal court on Friday, laying out the details of an elaborate financial agreement related to the funding of Indian Lake Village Development Plan that has drained millions of dollars from the county and city.

The lawsuit cites a Tennessee law that prohibits municipalities from entering rate swap agreements — a deal that allows its parties to exchange fixed and variable interest rates. The IDB was “induced to enter into illegal rate swap agreements ... and the county's property tax revenues have been used to make payments to [Fifth Third Bank],” Sumner County officials claim in the suit.

According to the lawsuit, county property tax dollars funneled through the IDB have gone toward paying losses resulting from the rate swap agreement — rather than paying off the IDB's investors. County officials claim they didn't see any proposed agreement before the IDB passed the two deals —their combined value totals $18 million — with Fifth Third in 2006.

Overall, the lawsuit — view it here — estimates that $2.6 million has been paid to Fifth Third to cover losses and fees while only $1.7 million has been distributed back to investors. The county is asking U.S. District Court of Middle Tennessee to void the rate swap deal and determine what portion of the county tax dollars have gone toward the agreement.

Fifth Third officials said the bank doesn't comment on pending litigation, but added that they intend to vigorously defend themselves against the allegations in the lawsuit. Scott Derrick, one of three Gullett Sanford Robinson & Martin attorneys representing Sumner County, didn't return a call on Monday.

The Sumner County Ad Hoc Committee to Investigate the Tax Increment Financing voted to file suit on Jan. 25, according to Sumner A.M.