The former chief executive of a failed bank in Lincoln, Neb., was sentenced to 11 years in prison for forming a scheme to hide more than $100 million in losses from shareholders and regulators.
Former TierOne Bank CEO Gilbert Lundstrom, 74, was also ordered by U.S. District Judge John Gerrard to pay a $1.2 million fine, the Office of the Special Inspector General for the Troubled Asset Relief Program said Wednesday. Following a two-week trial, Lundstrom was convicted on Nov. 6 of 12 counts, including conspiracy to commit wire fraud and securities fraud, conspiracy to falsify bank entries, wire fraud, securities fraud and falsifying bank entries.
Tarp-related fraud charges have been one of the few areas where prosecutors have found success punishing financial executives for their roles in the 2008 financial crisis.
"Lundstrom referred to TierOne as 'his bank' when testifying — and that's exactly how he treated it," Special Inspector General Christy Goldsmith Romero said in a written statement. "Make no mistake: this bank CEO was the driver of the criminal fraud. It was 'his bank' and his fraud scheme."
According to Romero's office, Lundstrom led the $3 billion-asset bank's aggressive portfolio strategy, which exposed it to riskier areas including Las Vegas commercial real estate. When those investments went south after the financial crisis, Lundstrom and his co-conspirators concealed more than $100 million in losses in TierOne's loan and real estate portfolio from investors and regulators. TierOne at the time needed to increase reserves and its loan loss allowance by $34 million to $114 million, according to SIGTARP.
The bank ultimately disclosed the $120 million in loan losses in June 2010. TierOne was subsequently delisted from the Nasdaq exchange and shuttered by the Federal Deposit Insurance Corp.
Lundstrom's co-conspirators, TierOne's former president and chief operating officer James Laphen, 67, and the bank's former chief credit officer Don Langford, 65, pleaded guilty to multiple charges related to the scheme in 2014. They were due for sentencing Thursday.