BOFI Holding Inc.

By Order dated June 9, 2016, the Hon. Gonzalo P. Curiel of the United States District Court for the Southern District of California appointed Bottini & Bottini as Lead Counsel over four related shareholder derivative actions brought on behalf of Bofi Holding, Inc.

Plaintiffs filed a Consolidated Amended Complaint on August 26, 2016. The Amended Complaint alleges that due to the misconduct of BofI’s fiduciaries, BofI suffered from a myriad of internal-control and risk-management problems during the Relevant Period. According to the internal audits conducted by a former employee turned whistleblower named Erhart, BofI was making substantial loans to foreign nationals, including politically-exposed persons such as foreign officials in war zones, in potential violation of anti-money-laundering laws and other banking regulations. BofI also provided loans to criminals and other suspicious persons. Id. Contrary to BofI’s representations to the Office of the Comptroller of Currency (“OCC”), hundreds of BofI accounts lacked required tax-identification numbers (“TIN”). Moreover, BofI was exposed to deposit-concentration risks: “a mere four customers accounted for approximately 25% of total deposits, and nine customers accounted for approximately 40% of total deposits.”

The Individual Defendants, however, are alleged to have concealed the existence and pervasiveness of these problems from BofI’s filings with the United States Securities and Exchange Commission (“SEC”) and BofI’s disclosures to the investing public. BofI’s senior officers—Garrabrants, Bar-Adon, and Tolla—interfered with Erhart’s audits and attempted to cover up his findings. Indeed, the Individual Defendants retaliated against Erhart in violation of Sarbanes-Oxley and other laws. In mid-December 2014, after Erhart’s direct supervisor, Jonathan Ball, evaluated Erhart’s performance, Tolla unilaterally downgraded Erhart’s performance evaluation. Ball directly reported Tolla’s misconduct to the Audit Committee Defendants. Id. The Audit Committee, however, approved the downgrading of Erhart’s evaluation.

The complaint seeks to recover the damages caused to Bofi by Defendants' wrongdoing.

On August 8, 2017, the Court denied Defendants' motion to dismiss. In refusing to dismiss the complaint, the Court held that Plaintiff had adequately alleged "demand futility" (i.e., had adequately alleged why BOFI's board of directors is not independent and disinterested, and why any demand on the board to bring the claims asserted by Plaintiff would be a futile and useless act). The Court held that Plaintiff had alleged with great particularity, as required by the applicable law, the elements necessary to maintain the shareholder derivative lawsuit. A copy of the court's order can be downloaded below.

The case is now in the discovery phase.