The SEC says the KMPG accountants ignored red flags and failed to obtain sufficient evidence supporting management's estimates of fair value of the collateral underlying the bank's troubled loans. Three TierOne executives were originally charged in the case; two have settled with the SEC and the other case is pending. The SEC said there was a complete lack of documentation for the auditors to be able to determine that the bank's internal controls for valuation of collateral were effective.

The SEC said that the extent of loan losses was not known until 2009 when the Office of Thrift Supervision required the bank to obtain new appraisals for impaired loans. As a result, TierOne disclosed more than $130 million in loan losses.

The SEC alleges Aesoph and Bennett engaged in improper professional conduct. A hearing will be scheduled to determine if the charges are true and whether sanctions are appropriate.