LINCOLN — The former chief executive of TierOne Bank was found guilty Friday morning on 12 of 13 charges in a criminal fraud trial related to the collapse of the firm. It was Nebraska’s largest-ever bank failure.
Gil Lundstrom, 74, could face a decades-long prison sentence after his convictions. He will be sentenced by a federal judge in February. In the meantime, he is free with no bond.
Neither Lundstrom nor his attorneys would comment on the verdict. Government attorneys also declined to comment.
Lundstrom was indicted last year on charges related to the insolvency of Lincoln-based TierOne, which collapsed after lending millions to out-of-state homebuilding companies that were trying to cash in on the housing bubble last decade.
Prosecutors said — and jurors agreed — that Lundstrom concealed delinquent and uncollectible loans from investors and regulators, making the bank look healthier than it was.
At the end in 2010, when the bank was seized and shuttered by regulators, shareholders were left with worthless stock that had tanked from a high in 2006 of about $35 a share. Loans not being paid as agreed ballooned to 22 percent of loans, many times the 3.2 percent that was the average for Nebraska banks at the time.
Though pale by the standards set by the failure of some Wall Street banks around 2008, TierOne’s collapse was epic by Nebraska standards: At its height in 2006, the bank was the second-largest based in the state. Under its control were 70 branches, $3 billion in assets and 750 employees. A 2002 initial public offering raised $220 million that was used to pursue profits from lending to the housing boom that was underway in places such as Florida and Las Vegas.
Ludstrom’s defense attorneys in the two-week trial had tried to paint the former bank chief as a victim of a duplicitous staff that was fiddling with the books unbeknown to Lundstrom.
Two former high-ranking workers at the bank pleaded guilty to misdeeds and testified against their former boss. They maintained Lundstrom knew what was going on the whole time the bank fell closer and closer toward oblivion.
Defense lawyer Dan Collins, of the Chicago office of the Drinker Biddle law firm, said Lundstrom relied on the figures and judgments provided by subordinates. He didn’t try to pull the wool of investors’ eyes, Collins said.
U.S. Prosecutor Henry Van Dyck, during his one-hour closing statement on Thursday, didn’t buy that explanation. "He did this. Find him guilty," he said. "Enough is enough with blaming everyone else for what happened at this bank."
On Friday, the jury agreed.