SEC v. Gilbert G. Lundstrom et al., Case No. 8:12-cv-00343 (D. Neb.); SEC v. Don A. Langford, Case No. 8:12-cv-00344 (D. Neb.).  On September 25, 2012, the SEC announced fraud charges against Gilbert Lundstrom, who was CEO and chairman of the board of TierOne bank; James Laphen, who was the bank’s president and COO; and Don Langford who was the chief credit officer.  Together, the three were involved in TierOne understating its loan-related losses as well as losses on real estate repossessed by the bank.  TierOne started making riskier loans, and so the Office of Thrift Supervision (“OTS”) directed the bank to maintain higher capital ratios.  To make it look as though there was more capital, Lundstrom, Laphen, and Langford ignored information showing that the collateral on various loans was overvalued.  The loan losses were understated by millions of dollars in many SEC filings.  The fraud came to light when OTS told TierOne to get new appraisals for the collateral.  The bank then disclosed more than $130 million in loan losses.  After the announcement of these losses, TierOne’s stock price dropped more than 70 percent, and the bank filed for bankruptcy shortly after it was shut down by OTS.

In addition, the SEC charged Lundstrom and his son with insider trading.  Lundstrom tipped his son about a proposed asset sale between TierOne and another bank.  Lundstrom’s son bought TierOne shares, and after the sale was announced, he sold the shares for a substantial profit.

Lundstrom and his son, and Laphen, agreed to settle the charges them.  Gilbert Lundstrom agreed to a judgment enjoining him from violations of Sections 10(b) and 13(b)(5) of the Exchange Act and Rules 10b-5, 13a-14, 13b2-1, and 13b2-2, from aiding and abetting violations of Exchange Act Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) and Rules 12b-20, 13a-1, 13a-11, and 13a-13, and from controlling any person who violates Exchange Act Sections 10(b), 13(a), 13(b)(2)(A), and 13(b)(2)(B) and Rules 10b-5, 12b-20, 13a-1, 13a-11, and 13a-13.  He also agreed to be barred him from serving as an officer or director of a public company.  Lastly, he agreed to pay civil monetary penalties of $500,921.   His son, Trevor Lundstrom, consented to a final judgment enjoining him from violations of Exchange Act Section 10(b) and Rule 10b-5, imposing disgorgement of $225,921, plus prejudgment interest, and imposing a $225,921 civil monetary penalty.

Laphen agreed to an injunction against violations of Exchange Act Sections 10(b) and 13(b)(5) and Rules 10b-5, 13b2-1, and 13b2-2 and from aiding and abetting violations of or controlling any person who violates Exchange Act Sections 10(b), 13(a), 13(b)(2)(A), and 13(b)(2)(B) and Rules 10b-5, 12b-20, 13a-1, 13a-11, and 13a-13.  He also agreed to be barred from serving as an officer or director of a public company.  He will pay a civil monetary penalty of $225,000.

Langford is litigating his case.