Here’s the link to the BofI transcript of the earnings call, thank you to Seeking Alpha for posting.
http://seekingalpha.com/article/3994905-bofi-holdings-bofi-c…
All the numbers are in there and as always, it sounds like they had another great quarter and year. It’s worth a read if for nothing else, than at the end of the prepared remarks, Garrabrants lays out the current state of the legal proceedings with Erhart and the class action suit. It’s quite a few paragraphs so I won’t post it all here, but if you own the stock, you should read it.
Obviously the outcome of these proceedings (whenever they occur) will either tank the stock again, or boost the share price significantly, as it’s been hobbled by this black cloud of allegations for a year, not allowing the stock to increase with the company’s increased performance.
A Seeking Alpha commenter “nomobailouts” at the end of the article sums it up best:
BOFI could hardly have been more emphatic about the lack of regulatory investigation or fine, the invalidity of the lawsuits and about the short sellers’ manipulative antics.
Sounds like they are planning to take action against the plaintiff to recover costs, and perhaps to raise pointed questions about the ethics of the legal firm involved.
It also sounded from this and the prior call as if they plan to proactively investigate the short sellers for evidence of any illegal behavior.
It clearly sounds like BofI is in the right here, although there are always 2 sides to every story, but they lay out a pretty convincing case that the allegations are false.
10 Likes
I found this to be of particular interest:
“In a decisive victory, one of motion requiring Erhart’s attorney Gillam to disclose her communications with short sellers, the media and other third parties. The shocking evidence shows Gillam providing BofI confidential information she apparently obtained from Erhart’s in the New York Times as well as communicating with a number of short seller hedge funds and sending celebratory e-mails about the stock price decline following the filing of Erhart’s complaint.”
Flygal
no position Bofi
http://my.fool.com/profile/TMFFlygal/info.aspx
6 Likes
I have been a litigation attorney for over 20 years. It is extremely unusual for a party to be able to obtain e-mails of opposing counsel. I have not reviewed the court file, but I would expect that the documents were probably originally ordered to be produced for an in-camera inspection by the Judge, who then reviewed the documents and decided to release them to BOFI.
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I agree with Pushkinator. The Judge must believe there is merit to the claims of BOFI and potential stock manipulation. Otherwise, the documents ordered to be produced are wholly irrelevant to the claims being brought by plaintiff. This could also bode well for the potential of sanctions against plaintiff and or counsel in the case.
Htownrich
8 Likes
Pushkinator,
Can you give us some insight on what might happen to an attorney who leaks information to a newspaper and hedge funds that are short during this process before trial?
Andy
Andy,
That is one of those questions where the legal and the practical do not match.
Unless there is a gag order, there is nothing wrong with leaking information to a newspaper or a hedge fund that is short. However, as a practical matter, it is not a good idea and you could get a judge mad at you and questioning your motives. If the judge does not like you, then both you are your client are in trouble.
I think the important issue with this matter is what was the motive in bringing the case. If the motive to file the lawsuit was to influence the stock price (not to judicially correct a wrong), then that is a big problem. Of course, it would be difficult to find direct evidence that the parties were filing the suit to manipulate the stock price. However, leaking information to a newspaper or a hedge fund that is short during the matter could be some limited circumstantial evidence. That is why I say there could be nothing legally wrong, but practically it is a mistake.
It would also be wrong for the plaintiff to threaten to release information if he does not receive a good settlement. However, parties do often settle matters to avoid bad publicity.
Sorry, I rambled.
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Pushkinator: Unless there is a gag order, there is nothing wrong with leaking information to a newspaper or a hedge fund that is short.
This isn’t a case of leaking information but IIRC a case of confidential client information and documents that BOFI alleges were stolen from the bank (along with a company laptop) and then funneled to the NY Times, Seeking Alpha writers, and others.
In addition, I believe the court ordered the laptop returned and when it was returned it contained communications between Erhart and his attorneys. Again, IIRC BOFI attempted by email and mail (and perhaps by phone) to return the communications to Erhart but he refused to reply. BOFI then attempted to return the privileged communications to Erhart’s attorneys, also by email and mail (and perhaps by phone) and his attorneys ignored the communications. BOFI then petitioned the court to retain the communications, arguing (citing case precedent) that Erhart and his attorneys had abandoned ownership of the communications.
This may not be entirely accurate but I believe the basics are correct.
8 Likes
Thanks Pushkinator,
That is exactly what I needed to know.
Andy
NewEchota,
Do you have a link to your information?
Andy
buynholdisdead: Do you have a link to your information?
The information is in the Erhart-related case filings online. Here’s a pertinent portion (relating to alleged stolen confidential information) from DECLARATION OF ANDRE J. CRONTHALL IN SUPPORT OF JOINT MOTION FOR DETERMINATION OF DISCOVERY DISPUTE NO. 1 (SMRH:476156689.1):
BofI’s First Amended Complaint arises from Erhart’s theft and dissemination of BofI’s confidential information, including: (i) information containing BofI’s intellectual property; (ii) confidential and proprietary information belonging to BofI, its employees, its business counterparties, and/or its clients (including BofI’s customer’s private banking information and social security numbers); and (iii) information containing the non-public personal information of BofI employees, business counterparties, and clients.
You can review all the court filings from both parties on https://www.pacermonitor.com/public/case/9622926/BofI_Federa…. In fact,
4 Likes
In case you haven’t seen it, two short articles have been written on BofI on Seeking Alpha since the earnings release two days ago, what timing, huh? They’re from the same two shorts that have written all the previous ones (The Friendly Bear and Aurelius) and they look like they’re rehashing the same things again.
Links posted below just to present the other side of the trade, but I’m not necessarily recommending reading them as I said, they don’t look like any new information.
The good news (for LONGS) is they don’t look like they’ve had any effect on the stock price this time! Up big yesterday and another percent and a half today. Hopefully we’re past the marketing tanking every time these guys reprint the same stories.
http://seekingalpha.com/article/3995038-court-filings-reveal…
http://seekingalpha.com/article/3995393-bofi-panama-papers-c…
5 Likes
Newechota
I agree releasing confidential information is wrong. I was just sticking to the question asked. Attorneys can be too literal some times.
1 Like
Pushkinator,
You answered it perfectly. I wasn’t asking a moral question but a legal one.
Andy