Online lender Bank of Internet (BofI) is being investigated by the Department of Justice for possible money laundering according to published reports. The bank’s Chief Executive Gregory Garrabrants, head of the bank since 2007, may be a focus of the probe. Neither the 18-year-old bank nor Garrabrants has been accused of any criminal activity. In late 2015, a Houston pension fund filed a civil suit against BofI and its CEO claiming the bank “misrepresented the risks of investing” with it. BofI allegedly filed incorrect call reports to hide loans made to foreign nationals without requiring them to provide a tax identification number — a form of ID that’s used to root out money laundering, the suit alleges.
BofI, pubicly traded with a market cap of $1.7 billion, is primarily an online-focused bank. Its deposits more than tripled to $6.6 billion since 2013, according to company filings. BofI’s accounting and money-laundering controls have been the subject of lawsuits for at least two years — since a former auditor, Charles Erhart, accused Garrabrants in a separate civil suit of flouting disclosure rules. The CEO allegedly deposited third-party checks into his personal account, the suit claims. In another, Garrabrants was the signer on an account for Charles Erhart, Charles’ brother and a minor league baseball player earning poverty wages, the suit claimed. The account had a balance of $4 million and was the largest consumer account at BofI.
The bank allegedly also didn’t disclose to the OCC that it had made as many as 200 loans to people without the ID numbers, a potential violation of the USA Patriot Act and the Bank Secrecy Act, according to the suit.Those people “included very high level foreign officials from major oil-producing countries and war zones,” according to Erhart’s suit.
Jeffrey Newman represents whistleblowers.