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The Walls Are Closing In On BOFI Bears

Summary

Court filings show egregious actions by Erhart and his attorney, Carol Gillam, shedding new light on a potential planned attack-for-profit by short sellers.

Gillam sent a pre-filing copy of the Erhart complaint to both The New York Times and Citron Research, a known short-seller, hours before it was publicly available.

A court order forcing Gillam to disclose communications with short sellers, proves she forwarded BOFI confidential information, apparently provided by Erhart, to the New York Times.

Most BofI Holding, Inc. (NASDAQ:BOFI) shareholders are fully aware of the ongoing litigation regarding a complaint filed by a disgruntled former junior employee, 29 year old Matt Erhart, on October 13, 2015 with the Southern District Court of California. That night, a scathing article was published in The New York Times by Peter Eavis. The following day, shares of BOFI dropped more than 30% at the open and closed down more than 25%, wiping out hundreds of millions of dollars in market cap. In the whistleblower complaint, Erhart claims he was threatened and fired for uncovering apparent violations of federal and state law. In The New York Times article, Greg Garrabrants, President and CEO of BOFI, responded:

Mr. Erhart has made all of these allegations in great detail to federal regulators, who have reviewed them in depth and have found them to be wholly without merit.

The federal regulators referred to above include the Office of the Comptroller of the Currency (OCC), the bank's primary regulatory agency, the Occupational Health and Safety Administration (OSHA), and the Securities and Exchange Commission (SEC). The Erhart whistleblower complaint has been under consideration to dismiss and has sat stagnant since March 14, 2016. Greg Garrabrants summarized the litigation clearly on the latest quarterly conference call:

The events alleged by former junior employee, Erhart, happened almost 1.5 year ago, by his account. One of the world's largest law firms conducted an independent investigation and found his allegations to be without factual basis and cleared management of the alleged wrong-doing. Subsequently, the bank has completed two record-setting fiscal years, closed two acquisitions that both required regulatory approval and successfully completed multiple OCC and Federal Reserve Regulatory examinations.

Six days after Erhart's complaint was filed, BOFI submitted a complaint seeking sanctions for damages against Mr. Erhart (BofI Federal Bank v. Erhart et al). Recent court documents filed under this action uncovers a likely planned attack-for-profit, strongly putting into question the credibility of Erhart, his claims against BOFI, and of the motives of his attorney, Carol Gillam. Namely, Gillam sent confidential BOFI information to The New York Times, information which was apparently provided by Erhart. Furthermore, Gillam sent pre-filing copies of the Erhart complaint to Citron Research, a known short-seller firm, hours before the complaint became public on the court website. On the latest quarterly conference call, Greg Garrabrants summarized the shocking nature of events surrounding the Erhart case:

In a decisive victory, one of...


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