The Complaint Came Too Late: J.P. Morgan Caught Filing FINRA Complaints After Firing Whistleblower
Published by Eric A. Welter on January 10, 2016
Employers need to think twice before pursuing disciplinary action against an employee who has filed a whistleblower complaint, lest such action be viewed by the courts solely as illegal retaliation.
A former broker for J.P. Morgan Chase was fired by the bank due, in part, to complaints about him filed by current and former customers with the Financial Industry Regulatory Authority (FINRA). However, later investigations determined both that some of the complaints were filed after his termination, and that many of them were written or transcribed by J.P. Morgan employees, rather than by the customers themselves.
Johnny Burris was a broker with J.P. Morgan Chase in Arizona who begin complaining in 2013 that the bank was unethically pushing brokers like him to sell the bank’s own mutual fund offerings even when competing funds were more appropriate to the needs of the customer. He collected evidence in 2012 and submitted it to both journalists and to the Securities & Exchange Commission (SEC), which commenced an investigation into the alleged practices.
After being fired by the bank ostensibly due to the customer complaints, Mr. Burris pursued a wrongful termination case that went to binding arbitration in 2014. Based in large part on the bank’s assurances that customers themselves wrote the FINRA complaints and had no assistance from J.P. Morgan employees, the arbitrator found no merit to Mr. Burris’ claims. The bank later admitted that an employee had “assisted the clients as a courtesy ‘by typing up what they told her verbally, reading it back to them for accuracy, and submitting them for review,’” although the customers involved in the complaints later claimed in signed declarations that the statements themselves were indeed drafted by a J.P. Morgan employee.
Also of significance is the retaliatory nature of the complaints themselves. Under FINRA regulations, a broker who receives three or more written complaints is subjected to what the agency calls “heightened scrutiny”, and in the industry it is generally accepted that brokers who reach this threshold are unlikely to be hired by other firms. Mr. Burris’ FINRA file contained exactly three complaints, all collected near or after the end of his employment with J.P. Morgan.
Subsequently, Mr. Burris filed a whistle-blower complaint with the Occupational Safety & Health Administration (OSHA), and a state judge overseeing Mr. Burris’ unemployment compensation claim found that J.P. Morgan personnel bypassed the company’s established procedures for progressive discipline in the rush to terminate his employment.
The SEC is currently concluding its investigation into the questionable sales practices that Mr. Burris and other brokers expressed concerns about, and current estimates indicate that the resolution may involve a settlement payment by J.P. Morgan for as much as $200 million or more.
Both the Securities & Exchange Commission (SEC) and 2010’s Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank), provide whistleblower protections that include both significant incentives and stronger support for individuals who deliver information that the SEC later concludes indicated or led to the investigation of violations.
In addition, Dodd-Frank expressly prohibits employers from engaging in retaliation against whistleblowers. Under the law, whistleblowers can sue for a range of remedies including economic damages, out-of-pocket and litigation costs, attorney fees and equitable relief, such as reinstatement of back pay, overturning a suspension, modifying a performance evaluation, and any other damages associated with whistleblower retaliation.
In addition, the whistleblower protection program managed by the SEC has historically awarded in excess of $54 million to more than twenty whistleblowers whose information led to an enforcement action that was ultimately successful. Awards in the program paid out of an investor protection fund that is financed by monetary sanctions paid to the SEC by rule violators.
While this case is ongoing, two lessons for employers are clear at the outset. First, there are multiple venues and remedies that can entangle both an employer and an employee in a dispute that involves potential whistleblower implications, especially when the enhanced safeguards and penalties of Dodd-Frank are taken into account.
Second, it is essential that field employees and front-line managers be strongly discouraged from engaging in any activity that could later be viewed as retaliatory, including the solicitation or transcription of complaints about an ex-employee, or the packaging and filing of potentially punitive actions against the ex-employee with regulatory bodies.