An internal auditor fired by BofI Federal Bank (now Axos Bank) after his whistleblowing on what he believed were unlawful activities at the Bank has won his federal lawsuit in San Diego, California. Charles Matthew (“Matt”) Erhart filed a complaint in October 2015 in U.S. District Court for the Southern District of California against BofI Federal Bank, alleging that he was retaliated against and terminated after he reported wrongdoing at the bank to management and to federal regulators. He prevailed on his claims for violations of the Sarbanes-Oxley Act of 2002, California Labor Code § 1102.5, wrongful termination in violation of public policy, as well as on his claim for defamation.
The jury found that Mr. Erhart reasonably believed the following conduct by Bofl was a violation of state, local or federal law or regulation:
· provision of a misleading response to an SEC subpoena
· the existence of a host of loans to criminals and/or politically exposed individuals
· failure to disclose to regulators accounts with no Tax Identification Numbers
· failure to disclose subpoenas to regulators in response to a request from regulators
· recorded telephone calls
· high levels of deposit concentration risk
· failure to disclose to regulators a high risk customer report regarding Global Cash Card
· failure to disclose the existence of an audit under the Flood Disaster Protection Act
· CEO Greg Garrabrants’ depositing of third-party checks into his personal account
· untimely 401(k) payments to employee accounts
The complaint in this case alleges: After the head of internal audit resigned, bank management prepared to terminate Mr. Erhart on the same day as learning of his whistleblowing. After Mr. Erhart called off sick and the Bank discovered he had gone to regulators, the bank threatened to send San Diego police after Mr. Erhart, made a series of defamatory statements about him, and terminated him.
The jury found for Mr. Erhart on all his causes of action, and found that the bank acted with malice, fraud, or oppression, entitling Mr. Erhart to seek punitive damages. The jury was not able to reach unanimity on the award of punitive damages, and the retrial of that phase will begin on August 23, 2022. The jury also found for Mr. Erhart on all six of the bank’s counterclaims.
Mr. Erhart is represented by Carol Gillam and Sara Heum of The Gillam Law Firm in Los Angeles. His attorneys made the following statement:
“We feel vindicated by this trial victory. After a hard-fought battle for seven years, our client can finally start to get some closure. The fight is not over, as we will be returning to try the punitive damages phase of the trial before a new jury, and the bank will doubtless be filing post-trial motions and an appeal afterward. But at least the world got to hear about what the bank did to Mr. Erhart and see that he was a righteous whistleblower. The jury found that the bank acted with malice, fraud, or oppression toward him. Their retaliation continued when they countersued him. We defeated each one of the bank’s retaliatory counterclaims against him. No whistleblower should ever have to go through what the bank put Mr. Erhart through all these years. Mr. Erhart is an American hero. We depend on employees like Mr. Erhart to expose corporate malfeasance. We hope this verdict sends a resounding message to corporations to take whistleblowers seriously.”
The Gillam Law Firm
Los Angeles, CA
Tel: (310) 203-9977