Former CEO of $3 Billion TierOne Bank Convicted of Orchestrating Scheme to Hide More Than $100 Million in Losses from Shareholders and Regulators
The former CEO of TierOne Bank, a $3 billion publicly traded commercial bank formerly headquartered in Lincoln, Nebraska, was convicted by a federal jury on Friday for orchestrating a scheme to defraud TierOne’s shareholders and to mislead regulators by concealing more than $100 million in losses on loans and declining real estate.
Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, Special Agent in Charge Thomas R. Metz of the FBI’s Omaha, Nebraska, Division and Special Inspector General for the Troubled Asset Relief Program (SIGTARP) Christy Goldsmith Romero made the announcement.
After a two-week trial, a jury in the District of Nebraska found the former CEO, Gilbert G. Lundstrom, 74, of Lincoln, guilty on 12 of 13 counts, including charges of conspiracy to commit wire fraud and securities fraud, conspiracy to falsify bank entries, wire fraud, securities fraud and falsifying bank entries. In 2014, co-conspirators James Laphen, TierOne’s former president and chief operating officer, and Don Langford, TierOne’s former chief credit officer, pleaded guilty to multiple felonies in connection with their participation in the scheme.
Evidence at trial showed that Lundstrom was the architect of an aggressive strategy to expand the bank’s portfolio beyond traditional lending in Nebraska to riskier areas like commercial real estate in Las Vegas.
Once the financial crisis hit, Lundstrom’s bet on real estate in riskier areas decimated the bank. Lundstrom and his co-conspirators then intentionally concealed massive losses—more than $100 million—in TierOne’s loan and real estate portfolio from investors and regulators and provided inflated figures in its required reports to the U.S. Securities and Exchange Commission (SEC) and the Office of Thrift Supervision (OTS).
In April 2009, Lundstrom and his co-conspirators learned that TierOne needed to increase its reserves and Loan Loss Allowance by between $34 million and $114 million, but concealed this information from shareholders and regulators in TierOne’s financial statements.
In addition, during TierOne’s annual shareholder meeting held on May 21, 2009, the evidence showed that Lundstrom misrepresented the state of TierOne’s capital ratios and reserves and whether TierOne had applied for TARP funding.
In June 2010, following TierOne’s ultimate disclosure of $120 million in loan losses and its subsequent delisting from the NASDAQ exchange, TierOne was shut down by the Federal Deposit Insurance Corporation.
At the time of the closure, TierOne had more than 750 employees working at TierOne’s headquarters in Lincoln and at its 69 branch offices located in Nebraska, Iowa and Kansas.
The case was investigated by the FBI’s Omaha Division and SIGTARP. The SEC also provided substantial assistance in the investigation. The case was prosecuted by Trial Attorneys Henry P. Van Dyck and L. Rush Atkinson and Senior Deputy Chief Sandra Moser of the Criminal Division’s Fraud Section.(FBI Release)