Court Filings Reveal Existence Of Undisclosed Second Alleged BofI Whistleblower

Aug. 03, 2016 9:25 AM ETAxos Financial, Inc. (AX)25 Comments
The Friendly Bear profile picture
The Friendly Bear


  • Publicly available court filings from February-April 2016 show that BOFI took specific legal steps to conceal details regarding a second "whistleblower" from the public court system.
  • According to filings, BOFI anticipated that the individual, a former Assistant Vice President with significant experience, was going to use BOFI information to "assist in government investigations".
  • This revelation shatters BOFI's prior intimations that its whistleblower activity was confined to only one "rogue" and "junior" employee.
  • BOFI actively petitioned the court to move the case into private arbitration because it was concerned that if the case went public it would cause "irreparable harm" to BOFI.
  • The undisclosed second whistleblower casts significant doubt on both the Audit Committee and Dentons investigations, neither of which ever addressed this second whistleblower.

During last night's BofI Holding (BOFI) earnings call, we were highly entertained by the discussion surrounding "investigations" and what the definition of an "investigation" is. In fact, when we asked Bloomberg to provide us with a transcript of the call, we got this odd video response:

Source: YouTube

We will let Brad Berning handle the philosophical question of what the definition of an "investigation" is. In the meantime, on to far more salient news...

...And then there were two...

We found a case in a San Diego court called BofI Federal Bank v. Golub, that shows that BOFI has been aware for quite some time of the existence of yet another "alleged whistleblower" and yet the company has not made any disclosure regarding this matter to investors. Needless to say, we think this finding is a BIG deal and is arguably the most "material" development related to the company since the first whistleblower case from October 2015. How can any reasonable investor not think that the existence of a second "alleged whistleblower" is not a significantly material revelation. We fondly remember Bob Ramsey speaking bullishly about BOFI stock months ago after he wrote that "no second whistleblower" had emerged. Hmm... will Bob be issuing a revision to his note in response to this article?

Will there be more whistleblowers? Are there already more? Is this the reason that the CEO provided a "Presidential-caliber" evasive response on the topic of "investigations"?

Author note: In this article, we use the term "second whistleblower" or "whistleblower" to refer to the employee in question in the Golub matter. Based on our review of BOFI court filings, the employee in question alleged that she was wrongfully terminated due to whistleblowing activities. It is important to note that from the filings, BOFI appears to dispute the former employee's whistleblower status (just as it disputes Erhart's whistleblower status). Nonetheless, BOFI's

This article was written by

The Friendly Bear profile picture
Short only research

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. 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 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.

Recommended For You

Comments (25)

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.