An independent banking consultant lodged a complaint with the U.S. Department of Justice over PNC Financial Services Group's pending sale of 57 National City branches to First Niagara Financial, contending that PNC may have chosen the buyer to minimize competition.

In his letter, e-mailed to the Justice department on Sunday, Miami-based consultant Kenneth Thomas questioned whether PNC "handpicked" First Niagara, a regional bank in upstate New York, "to avoid selling to a truly competitive big bank."

Pittsburgh-based PNC, which bought Cleveland's troubled National City Corp. on Dec. 31, was under government orders to divest 61 of roughly 170 local National City offices to settle antitrust concerns. Last week, First Niagara said it would buy 57 of those offices, with deposits of $4.2 billion. The remaining four will be sold to other banks.

Dr. Thomas, who has been an adviser to federal bank regulators, said it was important that the deal with First Niagara was "an arm's length" transaction.

Justice should make sure the deal "meets the terms and intent of the divestiture agreement," Dr. Thomas said. "The intent was to promote competition, not to have friendly competition."

In his letter to Justice, he called the order to sell 61 branches "inadequate," given that PNC would still hold a commanding 48 percent share of deposits in the Pittsburgh market vs. 8 percent held by its closest rival, Citizens Bank of Pennsylvania.

Dr. Thomas said several parts of the agreement with First Niagara pointed to a sweetheart deal.For one, he said, First Niagara has the option of selling to PNC as much as $150 million in common stock and debt at the closing.

This type of seller financing is rare, Dr. Thomas wrote, and "almost unheard of" in cases involving divestitures mandated by the Justice Department, due to potential conflicts of interest.

The arrangement implies "more of a cordial banker/customer relationship rather than a competitive one," he wrote.

"Think of Pepsi going into one of Coca-Cola's markets," he said. "Would Coke give financing to the No. 2 competitor?"

Dr. Thomas also questioned the $54 million that First Niagara agreed to pay for the branches, representing a 1.3 percent premium on deposits.

"Based on my experience, even in this current market, a deposit premium in the 1 percent range is generally associated with a failed or troubled bank, not one of the strongest banks in the nation, where the deal also includes performing loans," he wrote.

"This raises the question as to whether or not PNC accepted a very low deposit premium from a relatively small community bank to keep a truly competitive big bank out of its home market," his letter said.

Although National City was ailing when PNC bought it at year-end, the branches First Niagara agreed to buy "are some very good branches, with good deposits in good markets," Dr. Thomas said. He said he would expect them to fetch a premium in the 5 percent range.

The Justice Department and PNC declined comment yesterday. Presumably, Justice was kept abreast of the bidding process for the branches and gave a preliminary nod to the deal with First Niagara before it was announced.

First Niagara, which yesterday announced a plan to sell about $300 million in common stock, also declined comment yesterday.