JPMorgan Chase Loses Bid to Dismiss Whistleblower Lawsuit

By Mike Holter

(LEGAFI) -- A federal judge has rejected JPMorgan Chase & Co.’s bid to dismiss a whistleblower lawsuit by a former private banker who claims she was fired in retaliation for warning about a suspicious Israeli client. Her dismissal came eight months after the fraud of another JPMorgan client, Bernard Madoff, was exposed.

Jennifer Sharkey alleges in the JPMorgan Chase whistleblower lawsuit she was fired from her job as vice president and wealth manager in August 2009 following her continuous warnings about the client’s alleged involvement in mail fraud, bank fraud and money laundering. According to Shakey, the Israeli client had various undocumented businesses and unexplained funds transfers, and did business with Colombia despite New York-based JPMorgan's ban on transactions with that country. She also said the client generated about $600,000 of annual business for the bank.

In last week’s decision, U.S. District Judge Robert Sweet said Sharkey could continue to argue that JPMorgan violated the protections for whistleblowers under Sarbanes-Oxley, a 2002 governance law passed after Enron Corp's accounting fraud.

JPMorgan argued that the Sarbanes-Oxley claim should be dismissed because Sharkey did not specify which statute the client violated or which illegal conduct she supposedly reported to the bank.

Sweet dismissed JPMorgan’s argument, however, saying Sharkey is only required to have "reasonably believed" there was an applicable violation.

The JPMorgan whistleblower lawsuit has become a test case for the reach of Sarbanes-Oxley. In January, Sweet said the law protects whistleblowers who allege wrongdoing by a third party, not just by an employer.

Sharkey is seeking back pay and bonuses in the JPMorgan whistleblower lawsuit, and that her firing be expunged from her record.

The case is Sharkey v. JPMorgan Chase & Co., et al, U.S. District Court, Southern District of New York, No. 10-03824.