Fraud Friday — Former TierOne Bank CEO 15 Count Fraud Trial Delayed

October 16, 2015

By Bob Coleman
Editor, Fraud Friday

Fraud Friday — Former TierOne Bank CEO 15 Count Fraud Trial Delayed

Former Nebraska-based TierOne CEO Gil Lundstrom’ fraud trial has been delayed.

Indicted last December on 15 felony counts, the bank fraud the trial was scheduled to start this week.

TierOne was Nebraska’s largest bank failure during the Great Recession. Management is accused of overvaluing collateral and minimizing loan losses from 2008 into 2010.

Prosecutors say bank executives “made misrepresentations, and caused others to make misrepresentations, to TierOne’s shareholders, regulators, external auditor and the investing public about TierOne’s financial condition.”

TierOne took a bath in real estate loans outside their footprint — Nevada, Florida, Arizona and North Carolina.

Prosecutors say real estate appraisals were rejected that showed declining values.

“Lundstrom and his co-conspirators also restructured loan terms to disguise a borrower’s inability to make timely interest and principal payments.”

Prosecutors say management knew an additional $30 million was needed to cover bad loans in 2009. They chose to not increase the amount in the reserve fund for bad loans, making the company’s lending portfolio and financial results look better than they were.

When seized by the feds, 22 percent of loans were delinquent.