Ambac sues US, says IRS may ruin bankruptcy

Bond insurer Ambac Financial Group has sued the United States to block a seizure of $700 million of tax refunds that it said could destroy its ability to reorganize in bankruptcy court. The company said the Internal Revenue Service has been examining and may seek to recoup the refunds, which relate to losses that Ambac suffered from credit default swaps that insured municipal, corporate and asset-backed debt. Ambac is seeking a court order letting it keep the refunds, and declaring it has no tax liability from 2003 to 2008.