Risk & Compliance

Ex-TierOne Bank CEO Guilty of Hiding Losses

A federal jury rejects Gilbert Lundstrom's defense that he never intentionally misled anyone about the Nebraska bank's problems.
Matthew HellerNovember 9, 2015

The former CEO of TierOne Bank has been convicted of concealing more than $100 million in losses on loans to hide the Nebraska bank’s problems as it slid toward collapse.

After a two-week trial, a federal jury found Gilbert Lundstrom, 74, guilty of 12 of 13 counts, rejecting his defense that he never intentionally misled anyone about TierOne’s condition and instead had relied on information from executives at the bank who reported to him.

Lundstrom testified he was lied to by former TierOne President James Laphen and Don Langford, the bank’s former chief credit officer, who both pleaded guilty to similar charges and testified for the government.

“Lundstrom and his co-conspirators “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 regulators, the U.S. Department of Justice said in a news release.

After TierOne ultimately disclosed $120 million in loan losses, it was shut down in June 2010 by the Federal Deposit Insurance Corp. and sold to Great Western Bank. It had grown to be the second-largest bank headquartered in Nebraska, with $3 billion in assets, 70 branches and 750 employees.

According to the government, Lundstrom was the architect of an aggressive strategy to expand TierOne’s portfolio beyond traditional lending in its home state to riskier areas like commercial real estate in Las Vegas. The bank opened loan offices in Las Vegas and Florida and approved multimillion-dollar loans to developers.

“We were in Kansas, Iowa and Nebraska, and you can only do so much there,” Lundstrom testified. “It looked like a very good business strategy.”

But with delinquencies from homebuilders rising, prosecutors said, Lundstrom learned in April 2009 that TierOne needed to increase its reserves and loan loss allowance by between $34 million and $114 million, but concealed that information from shareholders and regulators in its financial statements.

“His pride and his ego came first; his employees and shareholders came second,” Justice Department attorney Henry Van Dyck told the jury.