Conference Call at 5:30PM EDT (2:30PM Local PDT)

Thanks to TMFFlygal on the RB boards:



Listening to it now:

CEO basically says Erhart is colluding with short sellers and they will all go to jail. WOW!



CEO seems really on point with all the acquisitions in the court filing complaint. He basically calls the entire complaint pure fiction and is for the benefit of short sellers.


FYI this is the most amazing call I’ve ever heard in terms of bluntness. Listen to the replay if you get the chance.


CEO also says BOFI is going to have an absolutely blockbuster year and they’ll get through this and performance will win out. (That is to the best of my memory on listening.)

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Thanks Charlie. Please keep the updates coming…I tried, without success, to get on the conference call.

Thanks Charlie. Please keep the updates coming…I tried, without success, to get on the conference call.

He is so clear and detailed on all the claims, it is amazing! Either he is the greatest liar ever or he’s telling the truth. I’m thinking it is the latter.

Plus they have so much information on the plaintiff Erhart and says once they show all the emails, evidence, etc. the truth will be known.

Another good piece of info is that Erhart wasn’t the junior auditor on the claims. He would wasn’t following basic protocol and was a bad auditor.


CEO is absolutely RAILING on Erhart as a very poor auditor. CEO says “whistleblower” is not what to call this guy, “disgruntled employee” is what he is.


Making it clear the more senior auditor who left was basically let go due to failure to manage Earhart

CEO also says Erhart doesn’t have the funds to do the suit himself… He must be backed by some shorties. Eventually they will be found out and they will be sought out (for criminal and civil charges I assume).

A good question from the call: If Erhart was so bad at his job, why wasn’t he fired earlier?

Response: Since they have a culture that focuses on ethics that they tried to work with him and checked all his claims. He was only there for one review cycle. Yes they accept responsibility for keeping him for so long, but they tried to work it out and now he and his supervisor are now go. He was employed for 1+ years.


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I may be becoming overly paranoid, but I’m starting think there is a high correlation of short sale activity to the stocks we discuss on this board.

The earnings coming up will speak for themselves, and the nosedives we’ve seen could just turn things around on a dime, but man those results couldn’t arrive fast enough.

Patiently awaiting November to arrive,


CEO just said:

External auditor was NOT fired today. That was a fabrication floated around by the shorties today.


I read through 2015 Glassdoor submissions today. Lots of disgruntlement voiced. Low morale, excessive work hours, routine firings, high turnover, personal attacks on CEO.

Discomforting situations, made worse by my long call spread today :wink:


“…trying to get out of blackout so he can buy at $100”

I just got dropped from the call, unfortunately, but here are my notes I frantically typed up. Sorry for the disorganization, and I may have made mistakes trying to type while I listened, but hopefully they help a bit.

Yesterday received copy of complaint. Old, baseless, factually inaccurate claims.

junior audit team member

riddled with inaccuracies and misunderstandings

disgruntled employee

has contacted a variety of federal agencies, who took no action

detailed issues in in calls, met with federal agencies, provided documents during H&R block. OCC gave approval on Sep 1.

No regulatory issues arisen.

BofI has never mis-stated financials. Plaintiff never said so while working at the bank. Plaintiff uses the word “potentially"

Does not have 25% of deposits with only 4 customers. Employee didn’t understand reporting system.

Top 4 customers and top 9 customer represent 3% and 5% of total deposits, respectively.

Never omitted calculation from loan loss or leases. Employee did not understand the GAAP principles that applied. External auditors found no issues.

Audit committee determines bonuses, not management.

2014 review:
“audit work would not experience as many delays if he improved communication skills and did not wait for emails."

“use meetings for collaboration to ensure audit does not drag on"

Bank did respond to OCC account saying it did not have TINs, but was for deposit accounts. And did turn over 150 accounts in response to catch-all request.

Everyone at the bank uses Microsoft Outlook.

Bank’s core business has never been stronger. Will report a strong, record quarter that beats analyst expectations.

Q: examiners actually performing H&R regulatory exam did in fact hear all of the plaintiff’s concerns? They didn’t just go to a random whistleblower office?

A: That is correct. All were investigated, nothing is ongoing. OCC regularly reviews stuff like that, would not have approved the deal in the very month the allegations arose if there were issues. No regulatory restrictions or orders on their business.

Q. Are you loaning to BSA people?

A. Yes, were complemented on BSA practices after left exam. Do not do business with customers on prohibited OFAC? list. Easy to avoid. Baseless allegation. Plaintiff provided a series of loans he thought were suspect, and regulators reviewed them.

Q. (Missed it.)

A. Believes there is a coordinated effort with plaintiff, short sellers, media, and non-public information being provided. Very unhappy with the factual inaccuracies. Plaintiff conflates deposit accounts with loans, and CEO believes he surely must know the difference, and therefore believes it’s intentional misrepresentation.

Q. Can you size up largest total relationships with bank?

A. Largest customer is $30,000,000 in deposits with a 10-31 exchange company. Multiple underlying accounts.

Q. Have you talked to regulators today and confirmed they don’t view this as problematic?

A. OCC communications are confidential, but these are exactly the same allegations made earlier to regulators and we should feel very comfortable that these are non-issues with regulators.

Q. What is timeline of auditor leaving the bank? He claims it was not voluntary.

A. Bank received regulatory performance feedback about auditor. Auditor went onto family medical leave, filed a doctor’s note of some kind that said he needed medical leave. Investigation conducted while he was away, found that he was doing things he wasn’t competent enough to do. He was doing only about 25% of the work that other audit team members were doing. Bank did not fire him. Bank asked him when he’d be ready to discuss their investigations, and he refused to answer any questions. He failed to provide a subsequent medical form to renew his medical leave, so his leave expired.

Q. So he let his own employment lapse?

A. Yes.

Q. Can you comment on complaint that plaintiff was able to

A. There were a few borrowers that had subsequent involvement of an investigation of some kind, or criminal inquiry, but none during due diligance. At least one was very wealthy, owned a sport’s team, allegations that they had no other banking relationships is bizarre and silly.

Q. Plaintiff talking to OCC in Denver, but wasn’t D.C. working on H&R Block deal? Can confirm they talked to each other?

A. District office reviews, and if supportive, then forwards to national office for review. He doubts that regulators were unaware of complaints. Deal was approved, approved to process a huge portion of tax refunds for the country. Business has never been better. Looking at 30%+ EPS growth with minimal contributions from H&R block, add in block and we’re going to have an absolutely fantastic year. No corner cutting going on.

Q. Can you address John Ball resigning complaint?

A. Even though John had downgraded auditor and given specific feedback about poor performance, that resulted in John coming in for discussion about how that management had occurred. John had no allegations of wrong-doing, they’re Earhart’s allegations. John had suggested firing Earhart, but we wanted Earhart to finish up discussions from OCC, so we didn’t accept Mr. Ball’s recommendation. But that caused a lot of concern and tension. Mr. Earhart had a very belligerent manner with people and in emails, and there would often be very negative feedback given to John about Earhart’s interactions.

Q. About the spreadsheet lacking TINs. Were they elsewhere?

A. CEO laughs, calling it a wonderful example. OCC was asking for deposit information, and at time we had no foreign deposit accounts that lacked TINs. So to question about deposit accounts, BofI presented accurate information they had TINs on all of them. OCC then asked for a set of general BSA items, and so we included a spreadsheet of 150 non-alien loans that lacked TINs sent to OCC. Greg thinks auditor probably understood this, or maybe saw it out of context, but this wasn’t something Earhart was auditing. Normally a junior auditor would speak to their supervisor with more experience, or bring something up with the audit committee. Earhart never did that, and would routinely misunderstand what he saw and never ask anybody about it to get clarification. Spreadsheet was delivered to OCC under a different section. CEO doesn’t think he’s a whistleblower, but merely a disgruntled employee. CEO wants to know who is funding the suit.

Q. It sounds like he was a bad internal auditor, so why didn’t you fire him earlier?

A. I accept responsibility for everything that happens here, but audit manager reports to audit committee. Audit manager is no longer here, and has been replaced with a more experienced one. Earhart wasn’t around very long, went through review cycle where he was told he needed to improve. So nothing was done, he was being provided performance counseling and given multiple direct feedback from a variety of people about style and other things. But stepping back, neither Earhart nor his supervisor are with the bank anymore.

Q. When did he start?

A. September, 2013.

Q. So he was with bank for 1.5 years?

A. Yes, that’s about right.

Q. That’s a pretty long time.

A. As I said, neither the manager nor the internal auditor are here anymore. And I also said the manager had no issues of impropriety or made any allegations. And there was a direct discussion between Mr. Ball and the head of internal audit about what was going on, what happened. All these issues were fully discussed, and no allegations made by Mr. Ball.

Q. Will there be any discussion about the audit committee at board level, since they’re the ones that employ the audit director and manager, about ways they can improve their oversight?

A. Absolutely, and we don’t have low standards with regard to these things. They’ve done a great job with creation of a plan that included implementation of a system that is currently in place that specifically monitors performance of internal auditors to ensure that poor performance like Earhart’s won’t be replicated. Earhart wasn’t working on a legitimate payroll audit, but was taking salary information from the payroll person by using his audit authority, and then shared that information with other people in the compliance and audit department to allow them to be disgruntled. Part of the way we’d found out something had happened is that one of those individuals started asking about why their bonus was lower than someone else who had done fewer audits, and management said “wait a minute here”. So performance tracking systems are very important, and we have that and a more seasoned manager who is going to focus on these sorts of things, and we’ve signed a contract to implement a program called Archer that is even more sophisticated than what we have for tracking these audits. So I think the audit committee has done a great job of putting in a very serious program, and the level of improvement we’ve seen in general related to audit compliance and enhancements to audit function have gone very well.

Q. It sounds like the biggest problem the bank has is that this was an inadequately run and poorly supervised internal audit function.

A. We don’t have evidence of direct financial incentives, but it’s very strange that an internal auditor is disclosing material non-public information to reporters and short sellers (that they brought up in conversations with CEO). We don’t typically assume employees have nefarious intent, and so I’m not defending Mr. Ball in every respect, but frankly he did a fine job with other auditors and they didn’t go out of scope, to my knowledge, or shared confidential information with other people. These things that happened here hadn’t happened before. And so I agree it should have been caught earlier.

Q. On last CC, in response to misinformation about ongoing SEC investigation, you said there was none. And I wanted to clarify that’s still the situation.

A. Yes, that’s 100% still the case. “Exhausts administrative remedies” means regulators did not pursue it. Some didn’t even ask for a response, and for those that asked, bank responded and didn’t pursue. And then he decided to do this private lawsuit, and bank will pursue its own legal action.

Q. You just filed an audited 10-K, so presumably your auditors didn’t find anything?

A. We informed our auditors about this, and our own investigation, and external auditors reviewed it and found it to be completely without merit. And we filed our 10-K timely. The auditors are looking at LTV’s and stuff, so they’re not misstated. Some people are saying external auditor was fired, that’s not correct, we like our external auditor and they haven’t found anything wrong.

And then I was disconnected, unfortunately. I look forward to the replay. And again, there may be inaccuracies in the above.



CEO was just asked, with the stock under $100 would you be a buyer, he said, ABSOLUTELY, the quarter will be incredible, he would like to get out of blackout days so he could buy. He says he also wanted to know if he could release the quarter numbers today.

Making me want to back up the truck tomorrow!

Please listen to this call, it is incredible!

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Monkey, having lots of bananas invested in BOFI is also listening to the call.


Some of you humans have brains way bigger than you know what to do with. Y’all causing each other grief for what? What’s wrong with just finding a hammock, peeling a banana, and, you know, enjoying the sounds of the jungle? Why do all y’all hate each other so much?

Gee Whiz.

Humbly & absolutely flabbergastedly,

TTWO and LL ticker guide
(long BOFI and bought more today and feel much better regarding the BOFI stock if not humanity)


Now the CEO is talking about Options, this Friday’s $100 Puts! Crazy! He says ex-employees have been offered money to talk (on behalf of shorties)!

He will be working with the SEC to root out all the shorties!


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I didn’t do a very good job of representing the scripted comments, but the CEO basically went through and addressed all of the complaint items. It’s definitely worth listening to for anyone who is concerned.


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CEO says they will vigorously defend this, they’ll get through it, and they’re sorry for what investors had to go through today in regards to the share price dropping without merit.