FDIC sues former TierOne Bank officials for $40M

LINCOLN, Neb. (AP) -- Eight former TierOne Bank officials are being sued by the Federal Deposit Insurance Corp. because regulators say the board members and executives improperly approved risky loans in Las Vegas that contributed to the bank's failure.

The Lincoln Journal Star reported (http://bit.ly/12uuheU ) the FDIC says more than three-quarters of $200 million of loans the board reviewed went bad.

TierOne's demise was the largest bank failure in Nebraska history, failing in 2010 after concealing the extent of its real estate losses. The assets of the Lincoln, Neb.-based bank were sold to Great Western Bank.

The FDIC said the bank extended the terms of its bad loans in ways that concealed its financial situation, and officials ignored TierOne's own loan policy rules in approving risky Las Vegas loans.

The lawsuit said that the bank's top loan officer in Las Vegas earned bonuses for originating large loans, but never had any accountability for how those loans performed.

In some cases, bank officials failed to get land appraised before making loans to developers that planned to build homes, and the lawsuit said TierOne ignored signs that Las Vegas' housing market was slowing down.

Attorney Gregory Scaglione, who represents former CEO Gil Lundstrom and another executive, says the former bank officials shouldn't be held personally responsible for these loans because they weren't negligent.

Scaglione said regulators and shareholders approved TierOne's plan to open offices outside of its base in Nebraska, Iowa and Kansas to start lending in new markets like Las Vegas and Florida.

Scaglione and Chicago attorney J. Kevin McCall, who represents two former TierOne board members, both blamed the bank's problems on the collapse of the housing market and the Great Recession.

"No one reasonably foresaw the credit crisis and real estate market collapse which prevented the borrowers from repaying the loans and rendered much of the bank's collateral substantially worthless," Scaglione said.

McCall said his clients acted in the bank's best interest and suffered substantial personal losses when the bank failed.

This lawsuit is one of several that have been filed since TierOne Bank failed. The bank settled an investor lawsuit for $3.1 million last year, but several other cases, including a lawsuit against the KPMG auditors who signed off on TierOne's books, remain pending.

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Information from: Lincoln Journal Star, http://www.journalstar.com