Join CEO for hiding $100 million in losses
Two former TierOne Bank executives were sentenced Thursday to federal prison for their roles in a conspiracy plot to cover up loan issues. It’s being called “the largest failure in Nebraska’s history,” according to the office of the Special Inspector General for the Troubled Asset Relief Program.
U.S. District Judge John Gerrard of the District of Nebraska, sentenced James Laphen, TierOne’s former president and chief operating officer, to 34 months in prison, and the bank’s former chief credit officer, Don Langford, to 21 months in prison.
“Senior bank officials who keep two sets of books will be held accountable for their crimes, and the court’s sentencing of two bank officials to prison today is proof of that,” said Special Inspector General for TARP Christy Goldsmith Romero in a press statement.
“As the President of TierOne Bank, Laphen engaged in a cover-up conspiracy directed by bank CEO Gil Lundstrom to understate losses and use unrealistic loan collateral values to make it appear that the bank met required capital ratios,” added Romero.
“Chief Credit Officer Langford conspired with them to create a second set of books for regulators — one that hid astronomical write downs in loans — in what bank officers referred to as ‘smoke and mirrors’ and ‘hiding the ball.’ TARP capital was not designed to fund fraud, and SIGTARP stands united with DOJ Criminal Division to fight crime related to TARP,” concluded Romero.
According to the Lincoln Journal Star:
Laphen said he is “deeply ashamed” of his role and that he prays daily for investors and employees who were affected. TierOne stockholders lost tens of millions of dollars, while more than 200 employees lost their jobs when the bank was taken over by Great Western Bank.
“I can’t express enough the feelings of remorse I have,” Laphen told the court. “I wish I could have been stronger and braver and done the right thing.”
In addition to his prison sentence, Laphen was fined $200,000. He also will face two years of supervised release when he finishes his sentence and will be required to pay restitution, the amount of which is still to be determined.
The bank was shut down by the Federal Deposit Insurance Corp. in 2010 after it disclosed $120 million in loan losses and its subsequent delisting from the NASDAQ exchange. At the time of the closure, TierOne had more than 750 employees working at its headquarters in Lincoln and its 69 branch offices located in Nebraska, Iowa and Kansas.
On Wednesday, Judge Gerrard ordered 74-year-old former TierOne CEO Gilbert Lundstrom to 11 years in prison.
The Lincoln Journal Star reported that Laphen and Langford will both begin serving their time in June.