UPDATE: Former TierOne Bank CEO gets 11 years in federal prison

Posted by: Channel 8 Eyewitness News 


Press Release Courtesy of the U.S. Treasury Department


Bank Applied for $86 Million from TARP before Collapsing

WASHINGTON – The former CEO of TierOne Bank, a $3 billion publicly-traded
commercial bank formerly headquartered in Lincoln, Nebraska, was sentenced
to 132 months in prison today 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 Randall C. Thysse of the FBI’s
Omaha, Nebraska, Division and Special Inspector General for the Troubled
Asset Relief Program (SIGTARP) Christy Goldsmith Romero made the

Gilbert G. Lundstrom, 74, of Lincoln, was sentenced by U.S. District Judge
John M. Gerrard of the District of Nebraska, who also ordered Lundstrom to
pay a $1.2 million fine. The court deferred entering a restitution order
until after sentencing. On Nov. 6, 2015, after a two-week jury trial,
Lundstrom was convicted of 12 of 13 counts charged, including conspiracy to
commit wire fraud and securities fraud, conspiracy to falsify bank entries,
wire fraud, securities fraud and falsifying bank entries. 

"Lundstrom is now another bank CEO investigated by SIGTARP to be sentenced
to prison," said Special Inspector General Romero. "He was the architect of
the bank’s aggressive and risky growth plan that backfired when the housing
bubble burst. Instead of honestly communicating TierOne’s losses, this bank
CEO took intricate steps to conceal the bank’s true financial picture and
dig the bank into an even deeper financial hole. Lundstrom applied for $86
million in TARP funds on behalf of the bank. This was a critically
important conviction and we commend the commitment by the DOJ Criminal
Division and the FBI in holding bankers who commit crimes accountable."

"Today’s sentence shows the Justice Department’s commitment to prosecuting
individuals who abuse their corporate positions to commit fraud," said
Assistant Attorney General Caldwell. "Gilbert Lundstrom and his
co-defendants’ crimes not only contributed to the collapse of a major
regional bank during the financial crisis, but also destroyed the jobs of
hundreds of bank employees and led to massive losses for the bank’s
shareholders. The defendants recklessly gambled with bank assets and lied
to shareholders and government regulators, and through their actions drove a
respected regional bank into the ground. They have now been held
accountable for their crimes."

"The entire financial system is dependent upon full and truthful disclosure
by the executives of financial institutions and the sentence imposed today
sends a message to high level executives who abuse their position of trust,"
said Special Agent in Charge Thysse. "The FBI will continue to investigate
and bring to justice those who exploit their influence or position for
personal gain at the expense of the investing public."

According to the evidence presented at trial, Lundstrom designed an
aggressive strategy to expand TierOne’s portfolio beyond traditional lending
in Nebraska to riskier areas, including commercial real estate in Las Vegas,
which decimated the bank once the financial crisis hit. Trial evidence
showed that Lundstrom and his co-conspirators then intentionally concealed
more than $100 million in losses 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. 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, the evidence showed. In addition, trial evidence demonstrated
that during TierOne’s annual shareholder meeting held on May 21, 2009,
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 its headquarters
in Lincoln and its 69 branch offices located in Nebraska, Iowa and Kansas. 

In 2014, co-conspirators James Laphen, 67, of Omaha, TierOne’s former
president and chief operating officer, and Don Langford, 65, of College
Station, Texas, TierOne’s former chief credit officer, pleaded guilty to
multiple felonies in connection with their participation in the scheme.
Laphen and Langford are scheduled to be sentenced tomorrow by Judge Gerrard.

SIGTARP and the FBI’s Omaha Division and investigated the case. The SEC
also provided substantial assistance in the investigation. Trial Attorneys
Henry P. Van Dyck and L. Rush Atkinson and Senior Deputy Chief Sandra Moser
of the Criminal Division’s Fraud Section prosecuted the case.

SIGTARP and the FBI’s Omaha Division investigated the case. The SEC also
provided substantial assistance in the investigation. Trial Attorneys Henry
P. Van Dyck and L. Rush Atkinson and Senior Deputy Chief Sandra Moser of the
Criminal Division’s Fraud Section prosecuted the case.

By: Channel 8 Eyewitness Newsroom

Former TierOne Bank CEO Gil Lundstrom was sentenced in Federal Court Wednesday.  

He was sentenced to 11 years in federal prison for fraud.  
Also Lundstrom was fined $1.2 million.  

Lundstrom was convicted in November and was allowed to spend time in Florida prior to his sentencing.  

We’ll have more tonight on the Channel 8 Eyewitness News at 5 and 6.