This story appeared in Bank Digest.
The SEC has charged three former bank executives in Nebraska with allegedly participating in a scheme to understate millions of dollars in losses and mislead investors and federal regulators at the height of the financial crisis. The SEC alleges that Gilbert G. Lundstrom, James A. Laphen and Don A. Langford played a role in TierOne Bank, Lincoln, Neb., understating its loan-related losses as well as losses on real estate repossessed by the bank.
TierOne had expanded into riskier types of lending in Las Vegas and other high-growth geographic areas in Arizona and Florida, and the bank was experiencing a significant rise in high-risk problem loans. TierOne's primary banking regulator, the Office of Thrift Supervision, directed TierOne to maintain higher capital ratios as a result of the bank's increase in high-risk problem loans. To appear to comply with the heightened capital requirements, Lundstrom, Laphen and Langford disregarded information showing that the collateral securing certain TierOne loans and real estate repossessed by the bank was overvalued due to the bank's reliance on stale and inadequately discounted appraisals, according to the SEC. The losses were understated by millions of dollars in multiple SEC filings.
Lundstrom and Laphen agreed to settle the SEC's charges as did Lundstrom's son Trevor A. Lundstrom, who is charged with illegally trading on nonpublic information from his father about an anticipated asset sale. The Lundstroms and Laphen agreed to collectively pay nearly $1.2 million in the settlements, which are subject to court approval. The SEC's case continues against Langford.