JPMorgan whistleblower Johnny Burris, a former broker turned independent financial adviser, scored a victory against his former employer in a development that both vindicates him and tightly limits damages the bank must pay.
The Occupational Safety and Health Administration found that when Burris spoke up and refused to put his elderly clients into high-commission JPMorgan Chase investments in 2012, the bank retaliated by firing him, according to a decision released this week. Burris' manager then caused him "reputational harm" and "likely blacklist[ed] him" in the industry by inappropriately putting client complaints on his public FINRA BrokerCheck record.
As a result, JPMorgan must pay Burris $164,462 in back wages and damages for emotional distress, in addition to covering his legal expenses.
MUST CLEAR BROKERCHECK RECORD
JPMorgan also must try to wipe the client complaints off Burris’ BrokerCheck record. In addition, OSHA ordered the bank to inform its employees about the details of Burris' case by posting a notice about the findings. The purpose of such notices is to encourage whistleblowers to come forward.
The decision does uphold the bank's decision to fire him, a rationale critics say is legally untenable.
Burris plans to appeal the decision. "The firm had no valid reason to terminate me," he says.
In a statement, JPMorgan says: "Mr. Burris previously raised these claims in an arbitration before an independent, FINRA three-member panel. That case, for which all of Mr. Burris' claims were denied, involved the same basic evidence that we will present to an OSHA administrative judge. We look forward to presenting our case in the next step of this process and putting this to rest."
Quote"The DoL can't fire a whistleblower for a company." – whistleblower lawyer Tom Devine
While JPMorgan refers to FINRA as an independent entity, the self-regulator is run by member firms, including JPMorgan. JPMorgan's vice chairman, and former general counsel, Stephen Cutler, joined FINRA's board in November.
The decision supports Burris' central accusations against JPMorgan, which admitted guilt and paid the largest SEC fine of 2015 for the same kind of practices Burris accused it of engaging in. The regulator fined JPMorgan two years after Burris provided extensive evidence about JPMorgan's sales practices, which the bank later admitted breached its fiduciary duty to clients. As a matter of policy, the SEC does not disclose which whistleblowers provided evidence in specific cases. OSHA's decision cites the SEC case.
"The finding is notable for validating something critics of the industry have been saying for a long time," says Ben Edwards, a professor at Barry University Law School in Orlando, Florida, "that [many of] the people who call themselves financial advisers are not really financial advisers. They are commission-compensated sales people and, if they try to push back against this sytem, their firms likely either push them out or cut their pay."
BURRIS 'LOST BY WINNING'
The decision follows last month's Financial Planning report in which two former OSHA investigators came forward to say they supported Burris' claim against the bank – before they, like Burris, were fired. The investigators allege that the government's failure to protect Burris, who is now an RIA in Surprise, Arizona, is part of a nationwide breakdown in protections for whistleblowers. A prominent, recent demonstration of this, they say, is the government's failure to protect any of the whistleblowers in the ongoing unauthorized accounts scandal at Wells Fargo.
The new OSHA decision illustrates the laborious process by which the government fails whistleblowers, alleges Darrell Whitman, the first OSHA investigator who handled Burris' case. He maintains the bank should have been forced to rehire Burris years ago and pay all back compensation and damages.
"It's a good example of how the process is manipulated to disable whistleblowers. It is likely that [OSHA] will now contact Johnny and try to coerce a settlement," Whitman predicts.
Quote“Mr. Burris previously raised these claims in an arbitration before an independent, FINRA three-member panel, [and] all of Mr. Burris' claims were denied. " – JPMorgan statement
When cases settle, regulators often take no further action on whistleblowers' complaints, potentially lifting pressure on companies to institute reforms.
OSHA's San Francisco office routinely collaborates with and favors corporations in its whistleblowing investigations, Whitman alleges in an affidavit in his own whistleblowing case against the agency filed with the federal Office of Special Counsel. In all, six investigators, including Whitman, have been fired or pushed out of that office between 2010 and last year by the same manager now handling Burris' case.
Whitman's lawyer, Tom Devine, who has contributed to writing many of the whistleblower laws in the U.S. and worldwide, denounced OSHA's decision on Burris.
"This is a classic case where a whistleblower has lost by winning," Devine says. "There's no indication in the decision why it couldn't have been issued in 2013 instead of 2017. There's no excuse for leaving Mr. Burris twisting in the wind for three years of delay. ... The ruling [also] doesn’t recognize the existence of Mr. Burris' side of the story, let alone flesh out the facts of his alleged misconduct."
OSHA did not respond to Devine’s allegations.
Burris, who worked out of the bank's office in Sun City West, Arizona, and JPMorgan have 30 days to appeal the decision before an administrative law judge of the Department of Labor, of which OSHA and its Whistleblower Protection Program is a part. Or Burris could pursue the matter in federal court.
In its decision, OSHA found that JPMorgan retaliated for Burris' whistleblowing when it fired him on Nov. 6, 2012. But it also concluded the bank would have fired him the next year after discovering he had altered company letterhead.
Once the firm learned that Burris “was using fake letterhead during a routine audit on March 3, 2013, [JPMorgan] likely would have terminated him," according to the decision.
However, the day before the audit, on March 2, The New York Times published the first story airing Burris' complaints. Elsewhere in the decision, OSHA describes Burris' decision to go public with his complaint to The Times as a "protected activity" under whistleblower protection laws. A key factor in legally identifying retaliation is the timing between whistleblowing and an allegedly retaliatory action; in other words, the "temporal proximity" between the two.
Setting this proximity aside, Whitman called OSHA's logic "bizarre" given that it is based on supposition. Burris says his compliance officer knew about and had approved his use of the altered letterhead for three years.
The letterhead should have no bearing on the decision and should not appear in the findings, Whitman says. "Rather, it appears to have been added to cut off the whistleblower’s claim of relief as of March 3, 2013."
By deciding that the bank would have terminated Burris in 2013, OSHA limited the time period for which Burris is due back wages to the four months between his actual termination and the later, theoretical one. On this basis, it ordered JPMorgan to pay him lost wages of $64,462.03.
Burris says he is owed close to $2 million in back compensation for the four and a half years since his termination. He adds that he spent more than $100,000 defending himself in an earlier arbitration case against JPMorgan, which he lost.
Devine says the letterhead argument is "a pathetically inadequate basis upon which to deprive someone of [that much] in back pay."
The decision's supposition that JPMorgan would have fired Burris in 2013 is "legally irrelevant," Devine says, adding: "An after-the-fact justification by the DoL cannot substitute for the employer's stated reasons to fire a whistleblower. The DoL can't fire a whistleblower for a company."
While OSHA says the letterhead controversy rises to a firing offense, other JPMorgan advisers remain in good standing with the bank despite allegedly losing their clients thousands of dollars.
For example, clients of JPMorgan adviser Nisreen Nina Kallabat Byrne in Rochester Hills, Michigan, accused her of causing them losses totaling $335,544 in 12 incidents in her 24 years in the industry, according to her BrokerCheck record. Her clients were granted total damages of $197,128.
During his 19 years in the industry, clients accused another JPMorgan adviser, Michael Crane Lyons of Sun City, Arizona, of losing $77,868 in four cases, according to his BrokerCheck record. Damages totaling $34,152 were later awarded.
JPMorgan declined to comment on their records. Byrne and Lyons did not reply to requests for comment sent to them through JPMorgan.
PENDING FINRA COMPLAINT
Meanwhile, Burris still faces a complaint FINRA filed against him on JPMorgan's behalf in September – a move whistleblower advocates say smacks of ongoing retaliation – for allegedly causing a $624 client loss. The client in that case signed an affidavit saying he has no complaint against Burris.
Burris says he may represent himself before FINRA to save tens of thousands of dollars in legal costs because he believes he can't win in that forum.
"The system is fixed" in favor of large firms, he says.