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.