Whistleblower suit against JP Morgan tossed out

A federal judge recently dismissed a whistleblower lawsuit by a former JP Morgan Chase private banker who claims that she was wrongfully terminated after inquiring about the transactions of a wealthy client.

According to Reuters, US District Judge Robert Sweet provided a wide scope of the protections offered to whistleblowers under the Sarbanes-Oxley corporate governance law, by highlighting that they cover cases relating to alleged corruption by a third party and not only by an employer. In turn, the judge’s ruling could have an impact on the ability of employees to bring forward claims of fraud and other unethical acts to their employers without fear of victimization.

When the Dodd-Frank regulation was enacted last year, its provisions sought to expand on the protections and incentives offered to entice whistleblowers, such as receiving 10 to 30 percent of the monetary sanctions after providing information that exposes fraudulent behavior.

In the JPMorgan case, the plaintiff, Jennifer Sharkey who served as a vice president, said her August 2009 termination came after the New York-based international bank resisted her request to drop a longtime Israeli client who generated $600,000 of annual business, Reuters said.

Sharkey argued that she was wrongfully punished for her role in an internal investigation that lead to the discovery of the client's alleged involvement in mail fraud, bank fraud and money laundering.

In his response to the case, Sweet said that Sharkey neglected to properly allege a Sarbanes-Oxley claim because she failed to identify the specific illegal conduct that was the purpose of her whistleblower complaint.

The judge further stated that the statute ‘should not be read narrowly,’ given it was structured to promote corporate ethics and protect whistleblowers from retaliation, Reuters reports. Moreover, Sweet said that the law covered the reporting of violations by third parties.    

‘The statute by its terms does not require that the fraudulent conduct or violation of federal securities law be committed by the employer that takes the retaliatory action,’ the judge wrote.

Noting the statute’s provisions and legislative history, Sweet came to the decision that Sharkey ‘properly pled’ the reporting of her concerns to JPMorgan, which was protected conduct.

The judge granted Sharkey permission to replead her case, however he dismissed a breach of contract claim.