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A Manhattan federal judge rejected JPMorgan Chase & Co.’s bid to dismiss a whistleblower lawsuit by a former private banker who said she was fired in retaliation for warning about a suspicious Israeli client.
Jennifer Sharkey said the August 2009 dismissal from her job as vice president and wealth manager followed her continuous warnings about the client’s alleged involvement in mail fraud, bank fraud and money laundering.
She said the dismissal came eight months after the fraud of another JPMorgan client, Bernard Madoff, was exposed.
According to Sharkey, 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 his decision, U.S. District Judge Robert Sweet Friday 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.
But Sweet said Sharkey is only required to have “reasonably believed” there was an applicable violation.
In this case, the “myriad” of allegations “taken together prevent a finding, at this stage, that Sharkey’s belief that suspect client was engaged in violations of the enumerated Sarbanes-Oxley statutes was unreasonable.” Sweet wrote.
Sharkey is seeking back pay and bonuses and an expunging of the firing from her record.
“We look forward to having the opportunity to present our evidence and having the case decided on its merits,” JPMorgan spokesman Darin Oduyoye said.
Douglas Wigdor, a lawyer for Sharkey, did not immediately respond to a request for comment.
The lawsuit is 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 said she had joined JPMorgan in 2006 and worked in its private wealth management group. She said she was her department’s second-highest producer, managing accounts for more than 75 clients with total assets exceeding $500 million.
JPMorgan is defending against a $19.9 billion lawsuit by Irving Picard, the court-appointed trustee seeking money for Madoff’s victims. Picard accused the bank of ignoring red flags about Madoff, a large customer for more than 20 years.
The case is Sharkey v. JPMorgan Chase & Co. et al, U.S. District Court, Southern District of New York, No. 10-03824.
(Reporting by Jonathan Stempel, editing by Bernard Orr)