BOFI: additional thought and questions

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Below is a cross post of mine from Saul’s board. Does anyone know the answers to my questions posed below? Some additional thoughts: do all foreign nationals have SSNs? If they are buying from overseas they may have provided their passports since they don’t have SSNs. Could this be a possibility…BOFI complied with all AML (anti-money laundering) requirements. Anyone know if AML allows for passports being sufficient to ID a person and that SSNs may not be required to buy property in the US?

saw a spreadsheet that contained as many as 200 accounts without tax identification numbers

It may be true that he say this spreadsheet and that the spreadsheet contained no SSNs. However, this is not proof that the bank doesn’t have the SSNs elsewhere. There are multiple explanations.

  1. BOFI is skirting the rules.

  2. BOFI is not skirting the rules. The ex-employee is disgruntled.

  3. BOFI is not skirting the rules. The ex-employee is working with short sellers in order to manipulate the stock price.

There are other explanations. I think that it would be impossible to prove wrongdoing on BOFI’s part without another audit/investigation into the bank;s records. So I ask these questions:

  1. Can this lawsuit trigger the bank’s regulators to start a new investigation of the bank?

  2. Can the court/plaintiff’s attorneys subpoena the banks records?

If the answer to either is yes then the doubt will remain and we could see stock price stay low or drop lower until this is cleared up and no wrongdoing is shown. If wrongdoing is shown then there are 2 questions:

  1. What is the extra risk exposure to BOFI and what is the direct or indirect impact on the bank’s financial position and prospects?

  2. Can we trust management in the future (for they would have lied and broken the law)? Do we want to be invested in a bank that commits such acts?

Chris

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Some additional thoughts: do all foreign nationals have SSNs? If they are buying from overseas they may have provided their passports since they don’t have SSNs.

ITIN Guidance for Foreign Property Buyers/Sellers:
https://www.irs.gov/Individuals/ITIN-Guidance-for-Foreign-Pr…

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Foreign sellers of U.S. real property interests need Taxpayer Identification Numbers (TINs) to request reduced tax withholding when disposing of the property interest, and to pay any required withholding. Individuals who do not qualify for Social Security Numbers (SSN) may obtain Individual Taxpayer Identification Numbers (ITINs) to meet the requirement to supply a TIN.

Foreign sellers of U.S real property need a TIN or ITIN. There was no mention of requirements of buyers of U.S. real property. This means that the lack of tax ID numbers on 200 accounts could have been foreign buyers who had no SSN or TIN.

The questions now are the following:

  1. What is the explanation of the “gaps” in the alleged spreadsheet?

  2. What is BOFI’s AML (anti money laundering) policy and procedure?

  3. Were the policies and procedures followed?

Chris

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Foreign sellers of U.S real property need a TIN or ITIN. There was no mention of requirements of buyers of U.S. real property. This means that the lack of tax ID numbers on 200 accounts could have been foreign buyers who had no SSN or TIN.

From the National Association of Realtors:

On August 4, 2003, the Internal Revenue Service (IRS) issued final Treasury Regulations requiring an Individual Taxpayer Identification Number (ITIN) from each foreign person at the time of filing all returns, statements, or other required documents for all closings dealing with the purchase or sale of a United States real property interest (USRPI) after November 3, 2003.

http://www.realtor.org/intupdt.nsf/pages/itin

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On August 4, 2003, the Internal Revenue Service (IRS) issued final Treasury Regulations requiring an Individual Taxpayer Identification Number (ITIN) from each foreign person at the time of filing all returns, statements, or other required documents for all closings dealing with the purchase or sale of a United States real property interest (USRPI) after November 3, 2003.

Thanks for that information, NewEchota. So from that it appears that purchasers of U.S. real property require a SSN or a ITIN. That is good information to know. However, there are remaining questions:

  1. Is BOFI required to verify the ITIN or just the identify of the person making the purchase? There are other ways to ID people.

  2. Did BOFI collect the SSNs/ITINs? It is possible that BOFI collected them and that they were not in the alleged spreadsheet. Who knows if that spreadsheet exists or if it exists what that spreadsheet was for.

  3. If BOFI did not follow its AML policy/procedures what is the maximum penalty or exposure to BOFI’s business? Centainly, it can’t be as high as $500M (today’s reduction in BOFI market cap).

  4. BOFI has been financing loan growth by issuing new shares so this stock price drop, even if temporary, could hurt future ROE.

Anyone know the answer to #3?

Chris

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