The bank's own probe found nothing that would impact the company's operating results or financial condition. Nor has an independent law firm found any violations of the law, or evidence that Jason Galanis has any direct or indirect control or undue influence over the company.
The special committee of the board did, however, find that the bank's Oct. 18 press release contained inaccurate statements, including overstating the degree to which the company had been in contact with regulatory agencies. On Jan. 12, the SEC issued a formal order of investigation directed at the previous matters as well as the Oct. 18 press release.
The board has responded by immediately separating the roles of chairman and CEO, and fired Steven Sugarman from both jobs. Current audit committee chair Robert Sznewajs will take over as chairman, and a search is underway for a new CEO. Interim duties will be carried out by the current chief risk officer and chief strategy officer.
Though operational trends remain strong, "reputational overhang" following claims of management conflicts of interest has Wells Fargo downgrading Banc of California (BANC flat) to Market Perform from Outperform.
Once a $22 stock, the price fell below $11 last month in the wake of those allegations, and is trying to climb back, currently at $13.90.
Following the stories of ties between Banc of California (BANC -2.1%) and Jason Galanis, SA contributor Real Talk Investments looked into the shady character's connection with BOFI. "My research leads me to believe that a reasonable person could infer that Galanis has a relationship with BOFI that remains undisclosed to this date," he writes, calling on CEO Greg Garrabrants to address the issue on tomorrow's earnings call.
Real Talk also takes note of BofI's external auditor Gary McCormick's ties to fraudster Barry Minkow.
Down sharply earlier thanks to the story, BofI has rebounded to off 0.15% on the session.
The bank yesterday made the "stunning" disclosure that an internal investigation regarding ties to fraudster Jason Galanis has been underway for more than a year, says the GeoTeam's Chris Irons.
Incredibly, the bank calls the investigation "independent," but a bit of digging finds the law firm doing the work has personally represented the company in the past, and is also a client of the lender.
Irons: "I believe the company can in no way be trusted to perform its own investigation into these matters and until further notice should not be taken at its word." He thinks the SEC at this point has no choice but to use its subpoena power to dig into the matter at Banc of California (BANC +0.9%).
SA contributor Aurelius, who started the firestorm earlier this week, weighs in on the latest in a new blog post.
With a 6% gain today to $14.13 per share, Banc of California (NYSE:BANC) now stands about 18% below its level of Tuesday afternoon when a blog post from Seeking Alpha contributor Aurelius warned of the lender's ties to serial fraudsters.
Alongside an early release of Q3 earnings (sizable beat) and a moved-up earnings call, legal counsel for Banc of California (NYSE:BANC) points to a government investigation which showed the shady Jason Galanis fabricated his connections to bank CEO Steven Sugarman's COR Capital.