SEC Charges Three Former Bank Execs for Understating Losses

The ""Securities and Exchange Commission"":http://www.sec.gov/ (SEC) charged three former executives of Nebraska-based TierOne Bank for their roles in a scheme that involved understating millions of dollars in losses, the agency announced Tuesday in a release.

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The SEC charged Gilbert G. Lundstrom, who served as CEO and chairman of the board at TierOne Bank, former president and COO James A. Laphen, and former chief credit officer Don A. Langford, for allegedly understating TierOne's loan-related losses and losses from the bank's real estate repossessions.

According to the agency release, TierOne ventured into riskier lending practices in high growth areas such as Las Vegas, and started experiencing a significant increase in high-risk problem loans.

Due to the increase in high-risk loans, the Office of Thrift Supervision (OTS), the bank's regulator, directed TierOne to have higher capital ratios.

The three attempted to appear compliant by disregarding information showing that the collateral securing certain TierOne loans and real estate repossessed by the bank was overvalued since it relied on outdated appraisals, the SEC release stated.

The truth about the bank's loans did not become apparent until late 2009 after OTS required new appraisals, which revealed more than $130 million in loan losses.

After the announcement of these loss provisions, TierOne's stock price fell more than 70 percent, and the bank eventually collapsed in June 2010.

Without admitting or denying the SEC's, Lundstrom and Laphen agreed to settle the charges against them.

Lundstrom was ordered to pay $500,921, and Laphen will pay $225,000. Langford did not agree to settle, and the SEC's case against him is still ongoing.