If you have any remaining question...

Investment Analysis Clubs Saul’s Investing Discussions
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If you have any remaining question, the below, copied from the lawsuit (bolding is mine), will blow you away!!!

V. BofI Failed To Disclose The Criminal Background Of A Senior Officer and Violations of the FDIA

205. BofI failed to disclose that an individual who served as BofI’s Senior Vice President of Wholesale/Correspondent Lending during part of the Class Period (“SVP 1”) is a convicted felon. BofI also failed to disclose that it is in violation of the FDIA for failing to obtain a required waiver under the act for SVP 1’s employment.

206. Section 19 of the FDIA provides that a person convicted of criminal offenses involving “dishonesty or a breach of trust or money laundering,” or who has agreed to enter into a pretrial diversion or similar program in connection with a prosecution for such offense,” may not:

(i) become, or continue as, an institution-affiliated party with respect to any insured depository institution;
(ii) own or control, directly or indirectly, any insured depository institution; or
(iii) otherwise participate, directly or indirectly, in the conduct of the affairs of any insured depository institution; 12 U.S.C. § 1829(a)(1)(A).

An insured bank cannot permit any such person to engage in prohibited conduct or continue any relationship described above. (12 U.S.C. § 1829(a)(1)(B)).

207. A bank may file an application for the FDIC’s consent for the individual to become an officer or director of the bank, or the individual may seek a waiver from the FDIC from complying with Section 19. Anyone who knowingly violates Section 19 “shall be fined not more than $1,000,000 for each day such prohibition is violated or imprisoned for not more than 5 years, or both.” (12 U.S.C. § 1829(b)).

208.
SVP 1 served as the Senior Vice President of Wholesale and
Correspondent Lending at BofI during the Class Period. According to his LinkedIn profile, SVP 1 began working at BofI in October 2010, and before that, at IndyMac Bank (the same failed bank at which Garrabrants worked) as a Senior Vice President.

209.
According to CW 5, who worked at BofI at the same time as SVP 1 and was familiar with him, SVP 1 served as a Vice President of Wholesale and Correspondent Lending from early/mid-2010 through April 2013. CW 5 explained that “Correspondent Lending” referred to BofI’s Foreign Nationals Loan program.

SVP 1 was promoted to Senior Vice President in May 2013 and became the head of the Foreign Nationals Loan program. SVP 1 reported to Swanson.

210.
A background search of SVP 1 performed on Lexis-Nexis revealed that SVP 1 has been convicted of numerous crimes, including grand theft, burglary, fraud and forgery involving credit cards, dealing in stolen property, and petit theft in Broward County, Florida in 1990. SVP 1 was sentenced and served time in a California prison.

He has also filed for Chapter 7 bankruptcy twice (in October 2011 and in June 2000), and has been a debtor in at least four actions involving judgments, and state and federal tax liens against him.

211. CW 5 indicated that SVP 1 was hired by BofI despite his criminal history and background check, which included fingerprints and an FBI background scan. CW 5 related that CW5 saw the results of the background check when they were received by BofI and that Garrabrants’s executive assistant brought the results to CW 5 and noted that SVP 1 had been in jail for theft. CW 5 related that the executive assistant said that Garrabrants and Swanson wanted “to sweep it under the table and give him a chance.”

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SaulR80683: If you have any remaining question, the below, copied from the lawsuit (bolding is mine), will blow you away!!!

Why should that blow anyone away?

You wrote about it yourself on November 20, 2015 in this thread on this board: http://discussion.fool.com/im-sorry-that-i-am-disturbing-so-many…

And every word in the complaint on this issue is from a November 18, 2015 piece by Seeking Alpha entitled “Undisclosed Executive History May Be Final Blow for BOFI”.

Really, the fact that you’ve sold is great; and encouraging others to sell is great, too. I also encourage everyone even remotely nervous to sell. Seriously, I applaud you for your concern for others.

But simply saying “This new ‘Houston’ class action makes me too nervous to hold” is all you needed to say because everyone here respects your guidance and opinion. Dredging up old allegations from Seeking Alpha is not helpful because while I respect you completely, I have no respect at all for the inflammatory and often false “reporting” done by Seeking Alpha and feel it’s necessary to at least expose its methods as highly suspect, point out that many of its allegations are based on hearsay evidence and that its conclusions are often unsupported by facts or merit… never once corroborated by a single industry expert or analyst. Seeking Alpha is not journalism, it’s pure opinion and always includes a ton of disclosures, which when you read them say, more or less, “What was written may or may not be accurate but since it’s just my opinion no one can sue me”:

Disclosure: I am/we are short BOFI.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: I am/we are short BOFI and have no present position in ECPG. All information for this article was derived from publicly available information. Investors are encouraged to conduct their own due diligence into these factors.

Additional disclosure: This article represents the opinion of the author as of the date of this article. The information set forth in this article does not constitute a recommendation to buy or sell any security. This article represents the opinion of the author as of the date of this article. This article contains certain “forward-looking statements,” which may be identified by the use of such words as “believe,” “expect,” “anticipate,” “should,” “planned,” “estimated,” “potential,” “outlook,” “forecast,” “plan” and other similar terms. All are subject to various factors, any or all of which could cause actual events to differ materially from projected events. This article is based upon information reasonably available to the author and obtained from sources the author believes to be reliable; however, such information and sources cannot be guaranteed as to their accuracy or completeness. The author makes no representation as to the accuracy or completeness of the information set forth in this article and undertakes no duty to update its contents. The author may also cover his/her short position at any point in time without providing notice. The author encourages all readers to do their own due diligence.

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I mean, what kind of bank knowingly hires a Senior Vice President who has been convicted of numerous crimes, including

Grand theft?
Burglary?
Fraud and forgery involving credit cards?
Dealing in stolen property?
Petit theft?

And then subsequently has filed for Chapter 7 bankruptcy twice?

And has been a debtor in at least four actions involving judgments, and state and federal tax liens, against him?

Is that bank’s stock really where you want to invest your money?

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Saul:

I have no opinion regarding whether BOFI is a good long term investment but I will say this about your concern of them hiring a felon:

http://www.salon.com/2015/06/24/robert_reich_americas_bigges…

They are in good company…witness the 2008 banking debacle courtesy of all our bank felons.

Let’s not get too altruistic that the banking industry is full of angels and do-gooders…obviously…not the case.

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I have a feeling that when this is all said and done, it would make for a good movie.

Daryn

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In your link, dumaflotchie, Reich is talking about corporations being convicted of felonies, while here, Saul is talking about a bank, BOFI, hiring an ex-felon with a disreputable past as an officer of the corporation.

Now I’m not addressing you personally, dumaflotchie, but I am addressing the many posters on this board who think this lawsuit is akin to a Seeking Alpha short attack or hit piece.

So let me ask those of you who are reccing the posts of New Echota onto the Best Of list daily a few questions specifically addressing what Saul and dumaflotchie have opined about in this thread:

Is hiring a known felon as an officer or your bank good corporate governance?

Does this show conservative bent in crossing every T and dotting every I when doing due diligence as the CEO would lead investors to believe?

Or does it show a corporate culture which lets things slide because “everybody does it, just don’t get caught,” as a lot of people on this board are willing to cede?

Johnny’s mom leaves a loaded gun in the hand purse. Johnny shoots mom in the butt. But don’t blame Johnny, blame mom. Meanwhile, many of the BOFI Templar on this board would say, “Don’t blame Johnny’s mom, the news is rife with mothers and fathers and grandparents leaving loaded guns in the reach of children. Bah, it happens all the time. Everybody does it. Nothing to see here. Move along.”

That type of thinking is not the way to approach investing.

What was once scandalous allegations - whether some are true, some are false - on the internet, are now part of a class action lawsuit.

BOFI’s squeaky clean image is no more. And you can bet this fast expanding class action lawsuit which is sucking in new plaintiffs as well as new ex-employees telling all in the discovery phase is not without some merit somewhere.

Saul is right to have dumped his shares. He can always buy back in if all of these allegations are proven false. But we’re starting to see patterns develop in the complaints from ex-employees. As these add up, it’s sure to attract the attention of Federal investigators again. The cold case is re-opened.

Caveat emptor.

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BOFI Templar

is worth at least one rec!

Thank you for recommending this post to our Best of feature.

Denny Schlesinger

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Ok Thom,
I have been recommending his posts. So is this the SeekingAlpha article you are referring to?

•My research suggests that BOFI has employed a former felon for over 5 years in a very senior and pivotal role (SVP, with oversight over the bank’s mortgage operations).

•Banks are strictly prohibited from employing ex-criminals absent a formal FDIC waiver…I searched public Section 19 FDIC records and found no evidence of a Section 19 waiver on file.

•The executive appears to have filed for bankruptcy while employed by BOFI. BOFI then made him 2 loans (totaling over $700k) after his bankruptcy!

•If my research is accurate, BOFI had to have known of the executive’s prior criminality given that it would have come up during the credit checks associated with his loans.

•Therefore, I believe BOFI is in violation of Section 19 of the Federal Deposit Insurance Act 12 U.S.C. 1829.

Recently, I outlined a number of questions I thought Bofi Holding, Inc (NASDAQ: BOFI) management needed to answer to regain credibility. To my knowledge and based on sell side notes, I do not believe BOFI responded to any of my questions. Therefore, today I am shining a light on what I think is a “smoking gun” moment for BOFI that suggests not only an absolute lack of internal controls, but a potential blatant violation of federal law. If my research is correct, it is unconscionable for regulators to allow the status quo to continue at BOFI.

DISCLAIMER: I am not trying to sling mud here. In this note I will not identify the bank executive in question by name and I have also gone to great lengths to hide direct identifying information from this note. I have gone through multiple verification angles to determine if the individual with a criminal background in Florida is indeed the same person currently employed at BOFI. This includes comparing his mugshot picture to his Linkedin picture, comparing various copies of his signature available on public record documents, and comparing DOB data from his mugshot with DOB records from public sources that point to an exact match. While I cannot obviously be 100% certain this is the same individual, my analysis has been rigorous enough to triangulate confirmation of ID through multiple avenues.

http://seekingalpha.com/article/3695396-undisclosed-executiv…

Now can you tell me the name of the person that he is referring to? I would like to investigate it if possible. But if you can not give me the name why would you believe it? It amazes me that people would believe something when no real information was given.

https://www.youtube.com/watch?v=3DZbSlkFoSU

Andy

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Now can you tell me the name of the person that he is referring to? I would like to investigate it if possible. But if you can not give me the name why would you believe it? It amazes me that people would believe something when no real information was given.

Hi Andy, If you look at the information that I included from the lawsuit in the first post on this thread, you should have no trouble at all in finding the name of the guy who is a convicted felon. I’m including it again below. This isn’t something made up by a silly short. It seems to be horrifyingly real!

As I said: what kind of bank knowingly hires a Senior Vice President who has been convicted of numerous crimes, including

Grand theft?
Burglary?
Fraud and forgery involving credit cards?
Dealing in stolen property?
Petit theft?

And subsequently has filed for Chapter 7 bankruptcy twice?

And has been a debtor in at least four actions involving judgments, and state and federal tax liens, against him?

Best,
Saul

P.S. Here’s the information about the person that you were searching (direct from the lawsuit):

205. BofI failed to disclose that an individual who served as BofI’s Senior Vice President of Wholesale/Correspondent Lending during part of the Class Period (“SVP 1”) is a convicted felon….

SVP 1 served as a Vice President of Wholesale and Correspondent Lending from early/mid-2010 through April 2013. CW 5 explained that “Correspondent Lending” referred to BofI’s Foreign Nationals Loan program. SVP 1 was promoted to Senior Vice President in May 2013 and became the head of the Foreign Nationals Loan program.

210.
A background search of SVP 1 performed on Lexis-Nexis revealed that SVP 1 has been convicted of numerous crimes, including grand theft, burglary, fraud and forgery involving credit cards, dealing in stolen property, and petit theft in Broward County, Florida in 1990. SVP 1 was sentenced and served time in a California prison.

He has also filed for Chapter 7 bankruptcy twice (in October 2011 and in June 2000), and has been a debtor in at least four actions involving judgments, and state and federal tax liens against him.

211. CW 5 indicated that SVP 1 was hired by BofI despite his criminal history and background check, which included fingerprints and an FBI background scan.

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NewEchota,

What surprises me in this whole affair is the amount of conviction you have in your decision. For me, successful investing has always been contingent on weighing ones chances correctly. When I look at the BOFI situation I see a couple of options:

  1. There is a legit claim in the class action suit and it will be very costly, if not ruinous for the bank
  2. The shorts have gone way beyond their usual (quick and cheap) business of setting a “sell” status or publishing a scathing “analysis”, and actually compiled a 100 page claim full of serious allegations, filed it to a court of law and lined up almost a dozen witnesses ready to perjure themselves
  3. Other possibilities like that the claim is legit but will not have bad consequences or is false but will still ruin the company etc. (an exhaustive list is not the point here)

When I read your posts, it seems you don’t even pause to consider anything else then the option 2). The only argument that I could find in your posts so far was that the reporting on the case is full of inconclusive language using words like “allegedly” or “claims”. To me this is a very weak argument as it’s the standard for articles reporting on trials. See http://www.nytimes.com/2006/01/18/business/worldbusiness/18i… for example.

So where does your utter conviction come from? Are there other recent cases of the shorts doing such an extensive, risky and expensive actions just to bring the stock down that are similar to the BOFI case? Is there something else I’ve overlooked?

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Hi Saul,

Thanks for the information but doesn’t it seem strange to you that the person writing the short would not name him. In fact you had to go down into the comments in order to find who he was talking about. He kept showing people how to find the information but wouldn’t actually name the person. That just seems really strange to me because if you are writing on something, and it is the basis of your thesis, why wouldn’t you put that into words? Just seems really strange.

Also Saul, you already knew that this was supposedly a problem with BOFI when you placed a new position. So wouldn’t that mean you had discounted this problem and really didn’t believe it? Otherwise if you still believed this was a problem, why get back in? Now the new report of almost 12 more employees coming forward seems to be more compelling.

Thanks for the discussion Saul.

Andy

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Thanks for the information but doesn’t it seem strange to you that the person writing the short would not name him.

It shows good sense to me as he was trying to avoid the possibility of being sued. The same with all the “alleged” references. All the accusations are “alleged” until they are proven in court.

Contrary to what the deniers are saying, because an accusation is “alleged” doesn’t mean that it’s false or made up. Just that the accuser is following what his lawyer told him and covering his ass. And just because he says he’s “short” doesn’t mean it’s false either, any more than someone on this board writing positive things about a company, but saying he’s “long” the stock, means he’s lying.

Also Saul, you already knew that this was supposedly a problem with BOFI when you placed a new position.

Early on it was a rumor which may have been correct. Now with the lawsuit documenting it, it seems to be an established fact that Bofi did indeed hire a Senior VP with that amazing record of convictions. That’s a bit different. Especially since we know that they also hired a head internal auditor straight from the failing, scandal-ridden bank that he had been supposed to be protecting as head auditor there.

Best,

Saul

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doesn’t it seem strange to you that the person writing the short would not name him.

No sense in opening yourself up to a libel suit. These short attack writers have to be very careful what they write. But he could have linked to a government document that substantiates the accusation (or innuendo).

Denny Schlesinger

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stenlis: NewEchota,

What surprises me in this whole affair is the amount of conviction you have in your decision. For me, successful investing has always been contingent on weighing ones chances correctly.

stenlis… Since you addressed me personally, let me explain.

First, I do not have a “conviction” as you suggest and do not believe I have even once encouraged anyone to add to or hold BofI. Instead, I have joined Saul to encourage anyone to sell if s/he is made nervous by an investment in BofI (or by any investment, for that matter). I agree with you that “successful investing has always been contingent on weighing ones chances correctly.”

Rather, the arguments I make are arguments against the “reporting” style of Seeking Alpha and are the same arguments I would make with respect to any equity attacked by “ifs and buts” quasi-journalism. Perhaps I have not been clear enough that the intention of my posts is not to rally the troops to defend BofI but to point out that Seeking Alpha is not a reliable source for honest information.

Again, here is all you need to know about the journalistic integrity of Seeking Alpha (quoting from the disclaimers that appear with every article published on its website):

“This article is based upon information reasonably available to the author and obtained from sources the author believes to be reliable; however, such information and sources cannot be guaranteed as to their accuracy or completeness. The author makes no representation as to the accuracy or completeness of the information set forth in this article and undertakes no duty to update its contents.”

I only stepped into these discussions when a laundry list of old allegations was posted as if new revelations had suddenly come to light within the Houston Municipal Employees Pension System complaint. There is very little new information in the Houston Municipal Employees Pension System complaint; primarily, that other former employees during the interview process have offered tales of loans to a Salvadoran gambling gang, a Venezuelan trust, and some former employees have said that one appraiser made too many appraisals.

As I mentioned elsewhere, the Houston Municipal Employees Pension System complaint cites Seeking Alpha and Aurelius 35 times and the foundation of its complaint is primarily built on Seeking Alpha articles, a publisher which, again, refuses to assure the accuracy or completeness of its reporting.

And perhaps a little review is in order with respect to the original Matthew Erhart complaint: Erhart brought his information to the SEC before filing his personal lawsuit and regulators evidently did not grant merit to his allegations (which is why he filed his personal complaint).

So, to make a long story short (no pun intended), my comments are almost entirely about relying on the veracity of Seeking Alpha, a publisher that makes no claims to be accurate, honest, or to provide complete, factually-based information.

I hope this helps and, again, please sell any equity that causes you concern. If my posts have made you believe that I am leading the call to buy BofI, I am not; rather, I am asking that you question allegations made by Aurelius and The Friendly Bear at Seeking Alpha. These writers, as they repeatedly state in their disclaimers, are short BofI; simply put, their objective is to drive down the price of the equity.

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Concise and well said NewEchota!

JT

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Hi Saul,

Early on it was a rumor which may have been correct. Now with the lawsuit documenting it, it seems to be an established fact that Bofi did indeed hire a Senior VP with that amazing record of convictions. That’s a bit different. Especially since we know that they also hired a head internal auditor straight from the failing, scandal-ridden bank that he had been supposed to be protecting as head auditor there.

Thanks Saul that makes it clear.

Andy

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I am asking that you question allegations made by Aurelius and The Friendly Bear at Seeking Alpha. These writers, as they repeatedly state in their disclaimers, are short BofI; simply put, their objective is to drive down the price of the equity.

New Echota
By this reasoning you shouldn’t believe “allegations” made by Kevin and DataBaseBob about Infinera as they both indicate that they are giving information that is just the best of their knowledge, they both indicate they are long Infinera, and thus, by your reasoning, simply put, their objective is to drive up the price of the equity.

Saul

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New Echota
By this reasoning you shouldn’t believe “allegations” made by Kevin and DataBaseBob about Infinera as they both indicate that they are giving information that is just the best of their knowledge, they both indicate they are long Infinera, and thus, by your reasoning, simply put, their objective is to drive up the price of the equity.

I really don’t think you can equate the motives (or the content)of posters on the MF message boards and those of Seeking Alpha short sellers, but that’s just my humble opinion!

Alex

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I really don’t think you can equate the motives (or the content)of posters on the MF message boards and those of Seeking Alpha short sellers, but that’s just my humble opinion!

Hi Alex
I wasn’t equating the motives. I was just pointing out that you can’t assume something is false because it’s been presented to you by someone who is short the stock, any more than you can be sure something is correct because it was presented to you by someone who is long the stock.

I feel there’s too much of “I can just ignore that information because it was presented by someone who is short”. But that’s just my opinion.

Saul

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SaulR80683:
New Echota
By this reasoning you shouldn’t believe “allegations” made by Kevin and DataBaseBob about Infinera as they both indicate that they are giving information that is just the best of their knowledge, they both indicate they are long Infinera, and thus, by your reasoning, simply put, their objective is to drive up the price of the equity.

Saul… here is why it’s different. Kevin is posting to a discussion board; he is not writing articles under the guise of journalism that are pulled through a financial engine “news” feed on financial websites like MarketWatch.

Click this link http://www.marketwatch.com/investing/stock/bofi and scroll down the page to the heading “Other News on BOFI” and you’ll see a list, including these “news” items:

BofI tumbles following SA article
10:42 a.m. April 14, 2016 - Seeking Alpha

The Walls Are Closing In On The Branchless Bank
6:51 a.m. April 14, 2016 - Seeking Alpha

Now if I went to MarketWatch’s “Other News on INFN” and found discussion board comments made by Kevin, you can bet that I would be taking a close look at what he wrote with respect to its accuracy.

What you’re suggesting is that some posters making discussion board comments about the Seeking Alpha articles are being pulled through the MarketWatch news section as news; that is not the case.

BTW, have you noticed that Seeking Alpha is removing (censoring) comments that are critical of/correcting some of the allegations in the latest article, “The Walls Are Closing In On The Branchless Bank”? I guess that’s not really a surprise considering the fact that Seeking Alpha is paying The Friendly Bear (and others) to write (an ongoing series of) short position articles:

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha).

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