The Houston Municipal Employees Pension System is suing Internet banking company BofI Holding Inc. (BOFI). The pension fund claims that the bank engaged in unlawful lending practices and other misconduct to enhance profits.
For example, according to the complaint, BofI Holdings refinanced a loan to a borrower involved in a gang-run gambling ring, did not disclose that it was using off-balance-sheet entities to buy lottery receivables, gave loans to foreigners with suspect or criminal backgrounds, did not have a healthy compliance system, and failed to tell investors that it was the subject of regulatory and government subpoenas and pending federal probes. The Houston pension fund is seeking class action status.
The case was spurred by a whistleblower court case filed by an ex-junior auditor at BofI Holdings. The whistleblower claimed that the Internet banking company issued loans to certain foreign nationals without properly vetting them even though some of them had criminal pasts. BofI denied his contentions and countered with its own lawsuit.
However, other former BofI employees have also come forward with their own fraud allegations against the bank, including that:
· The bank did not put into place or enforce proper internal controls.
· Violated the Bank Secrecy Act of 1970 by giving loans to foreign nationals with suspect histories.
· Hired a convicted felon for the position of senior officer without getting the required waiver.
· Gave loans to properties that did not comply with the Flood Disaster Protection Act of 1973.
· Gave loans to borrowers whose ability to pay the loans back was questionable.
Ex-employees have also expressed concern over the relationship between BofI Chief Credit Officer Thomas Constantine and appraiser Brendan Flynn, who appears to have been heavily involved in loan appraisals at the bank. Flynn’s appraisals have also been questioned for possible lack of merit.
Our Texas securities fraud lawyers represent institutional investors that have sustained losses. We also work with high net worth individual investors. Contact The SSEK Partners Group today and ask to speak with one of our pension fund fraud lawyers.
The Houston Municipal Employees Pension System, Reuters, April 14, 2016
Pension fund joins class action against BofI Holding, San Diego Union-Tribune, April 15, 2016