BofI Holding in San Diego is poised to end a tumultuous week, after a lawsuit accusing it of lax controls sent investors scurrying.
The New York Times published a story online on Tuesday that outlined a lawsuit filed by a former BofI internal auditor against the $5.8 billion-asset company, which claimed BofI possibly violated anti-money laundering rules, among other allegations.
After the story ran, BofI's stock plunged roughly 24% from its Tuesday closing price of $142 per share, to Wednesday’s opening price of $108.01 per share. BofI's stock traded at $103.41 per share late Friday.
Normally executives avoid publicly discussing pending litigation. But BofI's chief executive, Greg Garrabrants, hosted a conference call late on Wednesday to publicly and passionately decry the lawsuit and its allegations.
“The complaint recycles old, baseless, and factually inaccurate allegations from an inexperienced, underperforming, junior audit team member who had been with the bank for a short period of time,” Garrabrants said during the conference call. “The complaint is riddled with evidence of basic misunderstandings, inaccuracies, out-of-context statements and illogical conclusions.”
The lawsuit, filed by Matt Erhart, claims that the bank may have violated AML laws by making loans to certain foreign nationals, according to the New York Times. The complaint also argues that the company failed to provide complete and timely information to regulators, in addition to other allegations.
Garrabrants pointed out during the conference call that regulators have recently approved two acquisitions – including its purchase of certain assets and the deposits from H&R Block Bank – and argued that if any of the allegations were true then regulators wouldn’t have given its deals the green light.
“You should feel very, very comfortable that these are non-issues for the regulators,” he said. “You should feel very comfortable with that.”
BofI also issued guidance on Thursday for its upcoming third-quarter earnings report, saying it expects to exceed analysts' profit estimates.