JPMorgan Chase Defends Whistleblower Claim From Madoff EraBy
Jennifer Sharkey claims she was fired for investigating client
Case is rare trial of Sarbanes-Oxley whistleblower protections
A long-delayed whistleblower trial began Monday over claims that JPMorgan Chase & Co. fired a wealth manager for raising red flags about a client in 2009, just months after the discovery that Bernard Madoff used JPMorgan Chase accounts to advance his multibillion-dollar fraud.
Jennifer Sharkey, a former vice president of JPMorgan Chase’s private wealth management group, sued in 2010, claiming she was fired for investigating suspicions that a client might be involved in fraud or money laundering. The trial in Manhattan federal court is expected to take about a week.
It’s rare for a bank to be accused of violating whistle-blower protections in the 2002 Sarbanes-Oxley Act. According to Sharkey, she was fired less than a week after making a formal recommendation that the bank end its relationship with a client after she had spent months warning about possible illegal activity. The man is referred to in court only as "Client A."
"Ms. Sharkey’s career has been ruined for having the courage to stand up," her lawyer, Douglas Wigdor, said in his opening statement.
The first testimony in the case came from an expert witness, Anne Marchetti, who explained to the jury how to recognize signs of potential fraud in bank customers. Sharkey took the stand at the end of the day. She will continue her testimony Tuesday. U.S. District Judge Denise Cote ruled that Sharkey can’t testify about Madoff, because it could unfairly prejudice jurors against JPMorgan Chase.
"There will be no discussion of Bernie Madoff at this trial," Cote said in a pretrial hearing.
The bank claims Sharkey’s firing had nothing to do with her investigation of the person, who was later cleared in JPMorgan’s "Know Your Customer" process and remained a client. The bank claims Sharkey did her job badly and lied to a superior about communicating with a different client. Sharkey denied the allegations.
"My clients’ decision to terminate Ms. Sharkey had absolutely nothing -- nothing -- to do with any kind of whistleblowing,” Michael Schissel, a lawyer for JPMorgan Chase and the three bank supervisors who are also named as defendants. "She never went to JPMorgan and said ‘I think there is a fraud going on.’"
JPMorgan Chase claims Sharkey failed to return numerous phone calls from "Manager T," who worked for "Client H," and lied about it to her boss. At times, the parties’ opening statements sounded like a knotty word problem, as they discussed Client A, Client H and Manager T, all of whose identities are being kept hidden from jurors.
The trial comes after years of delays, including two appeals reinstating Sharkey’s claims after they were dismissed by U.S. District Judge Robert Sweet.
Wigdor asked the judge last year to take himself off the case, claiming he had shown potential bias against his client. Wigdor cited a remark by the judge from a pretrial hearing: "I would do anything to get rid of this case."
Sweet denied the request, but the case was reassigned within days to Cote.
Client A worked in the diamond and pre-paid calling card businesses, according to court papers. Sharkey told superiors the client’s businesses, multiple bank accounts and failure to provide information necessary to satisfy the bank’s "Know Your Customer" requirements raised questions that should result in terminating his relationship with the bank.
JPMorgan Chase had agreed to pay more than $2.5 billion in penalties and settlements to resolve claims it failed to adequately oversee accounts that Madoff used in his Ponzi scheme. Madoff is serving a 150-year sentence in federal prison in North Carolina.
The case is Sharkey v. JPMorgan Chase & Co., 10-cv-03824, U.S. District Court, Southern District of New York (Manhattan).