Fired federal investigators supported advisor's claim against JPMorgan
Two former federal investigators say they supported a whistleblower claim by former JPMorgan Chase broker Johnny Burris about the systematic pushing of high-priced investment products – that is, before they, too, were fired.
The handling of Burris’ case points to broader problems that go back nearly three decades with the federal government's failure to protect whistleblowers in financial services, as well as other industries. The path Burris has followed as a whistleblower is the same one traced by dozens, if not hundreds, of other whistleblowers in financial services – such as the Wells Fargo employees who sought to expose the bank's practice of opening fraudulent client accounts – in seeking both redress and protection under federal laws.
Three years after he first alerted the government about the problems at JPMorgan and his firing, Burris finds himself stuck in limbo – unsure if and when he will receive compensation or protection from the federal government under whistleblower laws.
One year ago, JPMorgan admitted wrongdoing for engaging in a nationwide sales practice that caused "significant harm" to clients, according to the SEC. The firm paid $307 million in regulatory penalties, not for actions in the Burris case specifically, but for the same kind of product pushing that he accused the bank of engaging in three years earlier. The case was the SEC’s largest last year and the fines paid by JPMorgan were substantially higher than the $185 million Wells Fargo paid in regulatory and other penalties over the unauthorized accounts.
Darrell Whitman, a former Department of Labor investigator who handled Burris' case in 2014, says "the evidence clearly supports a merit finding." A merit finding could force JPMorgan to rehire Burris, give him back pay and, possibly, other damages, according to whistleblower laws.
But Whitman says he was fired from his position in the Whistleblower Protection Program at the DoL’s Occupational Safety and Health Administration in May 2015 before the case was finalized.
'THE PROCESS IS BROKEN'
Susan Kamlet, a former assistant U.S. attorney in San Francisco who took over the OSHA investigation after Whitman's departure, says she found the evidence that Burris presented "extraordinary." But she, too, says she was fired, in January, before she could complete her investigation.
"Whistleblowers have no viable way of complaining and getting justice," Kamlet says. "The process is broken."
Kamlet and Whitman allege they were pushed out of their jobs, not specifically because of the Burris case, but as part of a pattern of abuse by OSHA officials that has kept whistleblowers from receiving protection due them under the law. In total, six investigators were fired or left a toxic work environment at the San Francisco OSHA office between 2010 and this year, according to Tom Devine, an attorney representing Whitman.
JPMorgan and OSHA officials declined to comment on the Burris case or the investigators’ allegations. Aides to U.S. Labor Secretary Tom Perez provided the following statement in response to questions about the Burris case and whistleblower issues involving JPMorgan as well as Wells Fargo: "As our review of all matters related to Wells Fargo proceeds, we are also taking the opportunity to look for ways to strengthen the whistleblower program so we can continue to improve our efforts to protect workers from being retaliated against on the job."
The regulator has filed a complaint against whistleblower Johnny Burris, who has filed multiple cases against one of its largest member firms, JPMorgan.
Fired adviser Johnny Burris complained the firm forced him to sell unsuitable products to clients, long before it acknowledged to the SEC it violated the federal securities laws.
The recording casts doubt on the CFP Board's claim that all CFPs are fiduciaries.
In recent years, Wells Fargo opened more than 2 million accounts for clients who had not authorized them, according to the federal Consumer Financial Protection Bureau. The revelation riveted national attention this year and led to the departure of Wells Fargo CEO John Stumpf in September.
Following numerous complaints about intense product pushing at Wells Fargo and alleged retaliation against employees who sounded alarms about the practice, the Labor Department said in September it would investigate its whistleblower program nationwide.
Burris, once a top producer in JPMorgan's office in Sun City West, Arizona, complained that he faced pressure from his superiors to put elderly and unsuspecting clients' retirement savings into high-commission bank products that Burris says were inappropriate for them. Months after he alleged he was being pushed to breach a fiduciary duty to those clients, the bank fired him in November 2012. Burris, now an independent adviser in Surprise, Arizona, later filed whistleblower complaints with several regulators, including OSHA.
A third former OSHA investigator who worked alongside Kamlet and Whitman also says that protections for whistleblowers have broken down at the Labor Department. The investigator asked to remain anonymous for fear of career repercussions.
INVESTIGATORS: REMOVE PROGRAM FROM OSHA
The three former investigators recommend that the whistleblower program should be taken out of OSHA and run independently.
"This is a really common feeling among investigators," the third investigator says, in reference to the approximately 90 full-time investigators nationwide. "There is nothing preventing the government from creating an entirely new whistleblower protection program that stands on its own, in the model of the Office of Special Counsel or another agency that is independent doing whistleblower protection cases."
Experts have long wanted to see whistleblower protection taken out of OSHA, says Devine, legal director of the Government Accountability Project, an advocacy group that has represented whistleblowers against the federal government since the late 1970s.
The unauthorized accounts scandal at Wells Fargo offers an object lesson as to why, he adds.
Of the hundreds of cases that Kamlet and Whitman handled, some were claims made by Wells Fargo whistleblowers who complained about the long-running fraud there years before it made headlines.
Like Burris, most of the Wells Fargo whistleblowers did not receive the protection to which they should have been entitled, Kamlet and Whitman say.
"They weren't just not protected, they were ignored," Whitman says.
Through its whistleblower program, OSHA collects reports of fraud or other problems across almost all of the country's largest industries, under 22 separate statutes through 33 regional offices. The statutes cover financial services, as well as the transportation, aviation, nuclear safety, trucking, food and drug industries.
"OSHA’s whistleblower statutes protect you from retaliation," the program website assures the public. The agency lists 11 actions that employers may not take against whistleblowers, including: firing or layoff, blacklisting or demoting, denying overtime or promotion, disciplining, denial of benefits, failure to hire or rehire, intimidation or harassment, making threats, reassignment affecting prospects for promotion and reducing pay or hours.
By law, whistleblowers are supposed to receive protection even from subtle forms of retaliation, such as not being invited to an office Christmas party, Whitman says.
'MISTAKENLY THINK THEY HAVE PROTECTION'
"People have heard of protection laws," the third investigator says. "They mistakenly think they have protection. Instead, when they file a complaint and try to seek protection, most of the time they are not going to get it. And the companies just see settlements as the cost of doing business. They have insurance. They don't care."
A 2010 report by the U.S. Government Accountability Office found widespread problems with OSHA's whistleblowing program going back 20 years. OSHA's own statistics show that less than 2% of all complaints have resulted in merit findings over the past decade.
However, Whitman says as many as a third of all whistleblowers whose cases are reviewed by the program deserve protection.
Whistleblower laws are designed to protect complainants even when there is only a reasonable belief there has been a violation of law, according to Richard Moberly, a whistleblower expert at the University of Nebraska's College of Law. More simply, protection is supposed to kick in even in cases where it is later determined that no wrongdoing has occurred.
Instead of protecting whistleblowers, however, OSHA's supervisors routinely sit on cases for years without taking action, even after its investigators recommend merit findings, Kamlet and Whitman say. Burris filed his case in 2013.
In other instances, the former investigators allege, supervisors push whistleblowers to settle with their former employers for small sums of money that remain confidential. These settlements may allow mismanagement or wrongdoing to continue after the whistleblowing cases are closed, the former investigators say.
After discovering that both of the OSHA investigators handling his case had been pushed out of their jobs, Burris complained to Perez via email on Oct. 20. A week later, Joshua Paul, a supervisor in the San Francisco office of the Whistleblower Protection Program, contacted Burris to say his case had been elevated to "top priority" status, according to Burris.
Kamlet and Whitman question whether Paul is capable of giving Burris’ complaint a fair review. They say Paul made it difficult for them to do their jobs before firing them and created a work environment that drove other investigators to quit.
When reached by phone, Paul said, "I'm not going to be responding" to questions about Burris' case or any of his former employees. He referred questions to the Department of Labor, which didn't reply beyond the statement on Perez's behalf.
'COLLABORATING' WITH CORPORATIONS
In an affidavit that is part of his lawsuit against OSHA with the Office of Special Counsel, Whitman accuses Paul of giving corporate defendants preferential treatment on cases.
"They are collaborating on cases with major corporations – flat out," Whitman says.
Kamlet says she did not see direct evidence of that. However she says that, following the economic downturn, pressure mounted at OSHA to dispense quickly with caseloads. As part of that process, according to Kamlet, Paul routinely engaged in negotiations with corporations in order to achieve settlements.
In his affidavit, Whitman alleges that Paul attempted to "substitute settlements for investigations." He further alleges in the affidavit that, in cases where Whitman recommended merit findings based on evidence that employees had been fired or otherwise targeted for retaliation specifically because of their whistleblowing, Paul engaged in conversations with defendants' lawyers – without informing the complainants, their lawyers or Whitman. He then denied merit findings in violation of the procedures outlined by the program's Whistleblower Investigations Manual, according to the affidavit.
Whitman says he unsuccessfully recommended merit findings in 19 cases, three of which concerned allegations of: generating false results in asbestos testing, unqualified and potentially inaccurate weather information provided to pilots, and a failure to conduct proper maintenance of aircraft in violation of FAA regulations by a major delivery company.
Paul repeatedly rewrote Whitman's reports to alter or remove factual evidence, Whitman says in the affidavit. In the case involving aircraft maintenance, for example, the affidavit says Paul rewrote his report "to make a convoluted argument that, because the company gave the complainant a commendation in the midst of the dispute, the company could avoid a merit recommendation. There was no legitimate reason for this argument."
'RUSHES TO JUDGMENT'
In a 2007 article in The William & Mary Law Review about OSHA's whistleblower program, Moberly, the whistleblower expert, wrote that investigators often failed to gather evidence from complainants or failed to allow complainants to respond to an employer's version of events.
"I worry more about rushes to judgment, quick decisions for the employer, where [OSHA] didn't go back to talk to the complainant," says Moberly, who was not aware of the Burris and Whitman cases. However, he says he thought OSHA had addressed this problem since 2007.
Since the departures of the six investigators, the likelihood of any whistleblower gaining a merit finding has dropped considerably, the three former investigators believe. Those investigators, all of whom hold law degrees, were replaced by military veterans without legal backgrounds, Whitman and Kamlet say.
Whitman's five former investigator colleagues in the whistleblower program, including Kamlet, have said they will support his pending case against OSHA with the Office of Special Counsel, Devine says.
"The program was a caricature of whistleblower protection," Devine says. "It basically served as a rubber stamp for corporate retaliation."
When it comes to the Labor Department's ongoing review of its whistleblowing program, neither Kamlet nor Whitman expect it to produce meaningful change.
"This study is nothing but CYA," Whitman alleges. He pointed to the GAO studies that have found that problems with the program have not been rectified in the decades since they were identified.
Stephen Kohn, a lawyer and one of the country's foremost whistleblower experts who represented a UBS whistleblower in a 2012 case that produced the largest IRS whistleblower award to date at $104 million, lays some of the blame at Perez's feet.
"He is not a whistleblower guy," Kohn says.
Kohn and Devine point to a controversy that arose in 2013 during Perez's confirmation hearings for his nomination as secretary. Republican members of Congress, including Iowa Sen. Chuck Grassley and California Rep. Darrell Issa, accused Perez of betraying a whistleblower named Frederick Newell while Perez was an assistant attorney general at the Justice Department. They claimed Perez dropped DoJ support for Newell in a quid pro quo to resolve another lawsuit – essentially allowing political expediency to quash a whistleblowing complaint that they contend might have been rewarded with millions of dollars.
During the hearings, Perez countered that senior officials in the department's civil division concluded Newell's case was "weak." All the decisions made surrounding it served "the interest of justice," he added.
Not all whistleblower advocates agree.
"Some people understand that whistleblowing is key to fraud detection," says Kohn, "and some people are afraid of whistleblowers and just don't like them."
'RIDE THE WHITE HORSE'
Kamlet says she falls in the former camp. The opportunity to work with whistleblowers proved compelling enough to persuade her in 2007 to take the OSHA job, even though it was below her skill and experience level. Kamlet spent 14 years as an assistant U.S. attorney first in Washington and then in San Francisco until 2001. She left her own private practice in Oakland, California, to become a whistleblower investigator.
"It was a chance to ride the white horse," she says.
For a number of years, she worked without conflict with her supervisor, Paul, according to four satisfactory or superlative performance evaluations from 2008 to 2012 reviewed by Financial Planning. Their relationship degenerated as Kamlet, partly due to a medical condition, failed to keep pace with Paul's mandate to rapidly close a rising number of cases, she says. In 2008, Kamlet handled an average of 14 cases at any given time, versus 51 cases by 2011, according to her performance evaluation that year.
During her eight years as an investigator, she says only about 10 of the more than 100 cases she handled resulted in merit findings.
Burris' case looked like it might have become one of them. Burris produced an unusual amount of strong evidence, including secret recordings of his superiors pressuring him to inappropriately favor the banks' products as well as internal documents, she says. In addition to finding the evidence persuasive, she says she found Burris "credible."
Some of Burris' supporters thought the SEC might give Burris a whistleblower award after JPMorgan paid $307 million in regulatory fines for the same transgressions he accused the bank of committing.
Instead, while the SEC is saying nothing about his award prospects (the commission keeps the identities of all whistleblowers and their cases confidential), another regulator, FINRA, filed a complaint against him on behalf of JPMorgan in September. It accuses him of causing a client to lose the relatively small sum of $624 four years ago. Burris has a signed affidavit from that client saying he never complained about him. Burris estimates it could cost him $60,000 to defend himself in the case.
"The complaint speaks for itself," FINRA spokeswoman Michelle Ong wrote in an email. "These are very serious violations." Ong would not elaborate on why FINRA regards the matter as "very serious."
'CLEAR AND CONVINCING' EVIDENCE
JPMorgan's rationale for firing Burris has never surmounted the "clear and convincing" evidence bar established by whistleblower laws, Whitman and Devine say.
The fact that JPMorgan fired Burris months after he turned whistleblower weighs against the bank, says Devine, who has participated in writing dozens of whistleblower laws in the U.S., as well as for Great Britain and the United Nations.
"The employer has to prove by clear and convincing evidence that they would have done the same thing even if the whistleblower had been a silent witness and done nothing" about alleged wrondgoing," Devine says. "Temporal proximity is the proof."
FINRA's decision to go after Burris has only raised the stakes in the controversy, Whitman says.
That presents "strong evidence of ongoing retaliation," Whitman says. "That should have prompted somebody somewhere to say that … we need to get this merit finding out the door to get reinstatement to protect this man.”