Companies caught in the withering glare of a hostile media and an unfriendly market have a long-established playbook to follow. First, proclaim something to the effect of “fake news.” Then deny everything in toto and, if possible, toss out some stats that sound flattering. Finally – and this is crucial – blame the cursed short sellers.
We've seen something to this effect in the case of Herbalife, Valeant and Tesla, among many others. But Bank of Internet might have just pioneered a whole new approach to corporate public image defense: paying short sellers to eat cheese.
The caller was Polly Towill, a partner with Los Angeles’ Sheppard Mullin and, according to Cohodes, she got right to the point: She was calling on behalf of her client, La Jolla, California-based BOFI Federal Savings Bank and she was authorized to explore retaining him as a consultant. What the bank needed him for, said Towill, was to help the bank’s legal team and its CEO, Greg Garrabrants, better understand how short sellers developed their opinions and how they shared their views. Of particular interest to BOFI, said Towill, was anything Cohodes knew about short sellers who published their research on Seeking Alpha, especially the one who used the pseudonym “Aurelius.”
For those unfamiliar with BofI, it's been a short target for years owing to its particular blend of quirks: a business model built around offering dodgy jumbo mortgages, a nosebleed valuation, periodic rumblings of wrongdoings ranging from bad accounting to money laundering, etc. In other words, it's a short-magnet. And given that all short-sellers are members of a shady cabal out to slander and destroy every honest business in existence – not to mention, they're all icky – it makes sense that Cohodes would know who was out there saying such mean things about BofI.
But short selling is a blood brotherhood, and Cohodes was having none of it:
She asked if Cohodes would be willing to sign a contract and become a consultant. When he replied that he’d only done this once, charging $1,100 per hour, she wanted to know if that was still his going rate. Cohodes then tried being outrageous and countered, “$15,000 an hour, three-hour minimum, all expenses paid.”
Towill didn’t blink and asked, “Is that your final offer?”
Trying the direct approach, Cohodes plainly said there was no way he’d work for BOFI.
Finally seeming to understand that he wasn’t going to consult for BOFI, Towill floated the possibility of using a subpoena.
Now, we're not lawyers over here, but it seems that if you're trying to tamp down pessimism about your company, threatening short-sellers with subpoenas might be the wrong approach. Needless to say, no subpoena was forthcoming.