Whistleblower Alleges JPMorgan Ignored Red Flags on Fraud

By Jonathan Stempel | February 16, 2011

A former JPMorgan Chase & Co. private banker has filed a new whistleblower complaint against the bank, saying it ignored many red flags about a suspicious client even after the fraud of another client, Bernard Madoff, was exposed.

Jennifer Sharkey contends that bank executives, including private wealth management chief Joe Kenney, “continually ignored” concerns she began voicing in January 2009, which is the month after Madoff’s Ponzi scheme was uncovered.

In an amended complaint filed Tuesday in Manhattan federal court, Sharkey said JPMorgan fired her in August 2009 in retaliation for her role in an internal probe into an unnamed Israeli client’s alleged involvement in mail fraud, bank fraud and money laundering.

Sharkey said she voiced dozens of concerns, including that the client had various businesses for which he did not provide documentation, and did business with Colombia despite JPMorgan’s ban on transactions with that country.

She also said the client had a “several million dollar” trading account in the name of a law firm that funneled money into JPMorgan commercial checking accounts, activity that the private wealth management unit “had no means of tracking.”

The client generated about $600,000 of annual business for New York-based JPMorgan, Sharkey said.

JPMorgan and Sharkey’s lawyer did not immediately return requests for comment. Sharkey seeks back pay and bonuses, an expunging of the firing from her record, and other remedies.

While separate from the Madoff case, the Sharkey lawsuit raises similar issues as those contained in a $6.4 billion lawsuit against JPMorgan by Irving Picard, the court-appointed trustee seeking money for Madoff’s former customers.

BANK SAID TO MISS RED FLAGS

In his complaint unsealed this month, Picard accused the bank of ignoring numerous red flags about Madoff, and being “thoroughly complicit” in his Ponzi scheme to preserve its more than 20-year banking relationship.

JPMorgan has said it will defend itself, calling Picard’s claims unfounded and saying it was not part of Madoff’s fraud.

Sharkey’s lawsuit is also a test case for the reach of the Sarbanes-Oxley corporate governance act.

Last month, the judge in the case said the 2002 law, passed in the wake of Enron Corp’s collapse the prior year, protects whistleblowers who allege wrongdoing by a third party, not just by an employer.

In his Jan. 14 ruling, U.S. District Judge Robert Sweet also dismissed Sharkey’s original lawsuit, but said she might pursue her Sarbanes-Oxley claim in an amended complaint that identified the Israeli client’s specific illegal conduct.

Sharkey said she joined JPMorgan in 2006 and was her department’s second-highest producer, managing accounts for more than 75 clients with total assets exceeding $500 million.

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

(Reporting by Jonathan Stempel in New York; Editing by Tim Dobbyn)

Subscribe Insurance news headlines delivered to your email.
Get a free subscription to our popular email newsletter.

Latest Comments

  • February 24, 2011 at 4:53 am
    ps says:
    How many whistleblowers can one entity can? http://www.politicsdaily.com/2010/01/28/long-island-congressional-candidate-cited-for-giving-up-jpmorgan/
  • February 16, 2011 at 3:16 pm
    barb wired says:
    today's business ethics seem to be its okay to do whatever you want as long as it turns a profit, and if you get caught, express regret, say you are sorry and act remorseful. ... read more
  • February 16, 2011 at 1:45 pm
    Sarah says:
    Sounds to me like a shake down of JP Morgan by a former employee. Thats just my opinion, I guess it will settle before anyone will know if it is just a disgruntled employee th... read more
See all comments

Add a Comment

Your email address will not be published. Required fields are marked *

*

More News
More News Features