A long-delayed whistleblower trial began Monday over claims that JPMorgan Chase fired a wealth manager for raising red flags about a client in 2009, just months after the discovery that Bernard Madoff used accounts at the bank to advance his multibillion-dollar fraud.
Jennifer Sharkey, a former vice president of JPMorgan Chase’s private wealth management group, sued in 2010, claiming she was fired for investigating suspicions that a client might be involved in fraud or money laundering. The trial in Manhattan federal court is expected to take about a week.
It’s rare for a bank to be accused of violating whistleblower protections in the 2002 Sarbanes-Oxley Act. According to Sharkey, she was fired one week after making a formal recommendation that the bank end its relationship with a client after she had spent months warning about possible illegal activity. The person is referred to in court papers only as "Client A."
U.S. District Judge Denise Cote ruled that Sharkey can’t testify about Madoff, because it could unfairly prejudice jurors against JPMorgan Chase.
"There will be no discussion of Bernie Madoff at this trial," Cote said in a pretrial hearing.
The bank claims Sharkey’s firing had nothing to do with her investigation of the person, who was cleared in JPMorgan’s "Know Your Customer" process and remained a client. The bank claims Sharkey did her job badly and lied to a superior about communicating with a different client. Sharkey denied the allegations.
The trial comes after years of delays, including two appeals reinstating Sharkey’s claims after they were dismissed by U.S. District Judge Robert Sweet. Sharkey’s lawyer, Douglas Wigdor, asked the judge last year to take himself off the case, claiming he had shown potential bias against his client. Wigdor cited a remark by the judge from a pretrial hearing: "I would do anything to get rid of this case."
Sweet denied the request, but the case was reassigned within days to Judge Denise Cote.
Client A was a customer of JPMorgan Chase, with income from the gem and diamond business, real estate, telecommunications, medical technology and pre-paid calling cards, according to court papers. Sharkey told superiors the client’s businesses, multiple bank accounts and failure to provide information necessary to satisfy the bank’s "Know Your Customer" requirements raised questions that should result in terminating his relationship with the bank.
JPMorgan Chase had agreed to pay more than $2.5 billion in penalties and settlements to resolve claims it failed to adequately oversee accounts that Madoff used in his Ponzi scheme. Madoff is serving a 150-year sentence in federal prison in North Carolina.
