OMAHA, Neb. (AP) — Three former TierOne Bank executives were charged Tuesday with concealing millions of dollars in real estate losses and misleading investors during the Great Recession.
The Securities and Exchange Commission filed the civil charges against former CEO Gil Lundstrom, former President James Laphen and former chief credit officer Don Langford. Lundstrom’s son, Trevor Lundstrom, was also charged with insider trading.
All but Langford have agreed to settlements. The Lundstroms and Laphen will pay nearly $1.2 million but did not admit any wrongdoing as part of the settlements.
The SEC says TierOne relied on outdated appraisals that inflated the value of real estate that the bank had loans on or had repossessed. The Lincoln, Neb.-based bank understated its losses by millions of dollars in 2008 and 2009.
Federal regulators closed TierOne in June 2010 and sold its assets to Great Western Bank.
The SEC’s Robert Khuzami said the TierOne executives failed a fundamental test of their management integrity by concealing the bank’s financial problems.
“The SEC’s complaints allege that as TierOne’s financial condition worsened, these executives utterly failed that test by understating losses on the bank’s troubled loans and concealing the bank’s deterioration from shareholders and regulators alike,” said Khuzami, director of the SEC’s enforcement unit.
Langford’s lawyer, Efrem Grail, declined to comment Tuesday because he hadn’t had a chance to review the complaint. Langford lives in Gibsonia, Pa.
Gil Lundstrom’s attorney, Greg Scaglione, said Lundstrom had cooperated with several investigations into TierOne’s failure, and he was glad to resolve this case.
Laphen’s attorney, Ed Warin, said his client was pleased to resolve the issue but didn’t want to comment on the allegations.
Trevor Lundstrom’s attorney didn’t immediately respond to a message Tuesday.
TierOne had losses in 10 of its last 11 quarters before regulators closed it as it struggled under the weight of bad loans in parts of the U.S. hit hard by the subprime mortgage crisis. Most of the nonperforming loans came from offices in states where foreclosure rates on subprime loans have been high, such as Arizona, Florida and Nevada.
Investors didn’t learn the extent of TierOne’s loan losses until late 2009, when regulators with the Office of Thrift Supervision required TierOne to obtain new appraisals of its impaired loans. That prompted TierOne to disclose $130 million of additional loan losses.
The SEC said if those losses had been recorded properly, TierOne would have fallen short of capital requirements as early as late 2008, at the height of the financial crisis.
Gil Lundstrom, who lives in Lincoln, agreed to pay a $500,921 penalty. Laphen, who lives in Omaha, agreed to pay $225,000. Both men also agreed to never again serve as officers or directors of a company.
In addition to the financial misstatements, the SEC said Gil Lundstrom shared confidential information with his son in 2009 that TierOne was preparing to sell some assets to Great Western Bank.
Trevor Lundstrom bought nearly 210,000 TierOne shares just before the deal was announced and sold them afterward for a $225,921 profit. Trevor Lundstrom, who lives in Birmingham, Ala., agreed to repay that profit and pay a $225,921 penalty.
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Online:
Securities and Exchange Commission: www.sec.gov
