On December 4, 2015, the New York Times (the “Times”) reported that JPMorgan Chase had solicited fake customer complaints against a former broker, Johnny Burris, when he reported to various news outlets and the Securities and Exchange Commission (“SEC”) that JPMorgan Chase was pressuring brokers like him to sell JPMorgan Chase’s proprietary mutual funds “even when the offerings from competitors were more suitable.”
According to the Times, in 2012, Johnny Burris had secretly recorded his supervisors at the JPMorgan Sun City West branch, outside Phoenix, using pressured sales tactics on their brokers to sell JPMorgan Chase’s proprietary funds. The recordings came after Johnny Burris had voiced concerns over these sales tactics, and had been met with resistance. Johnny Burris’ recordings prompted an SEC investigation and a currently pending settlement, wherein JPMorgan Chase will pay $100 million as a result of its unlawful practices. JPMorgan Chase subsequently terminated Johnny Burris.
On or about January 4, 2013, Johnny Burris, filed an arbitration claim against JP Morgan Chase alleging the following causes of action in his Statement of Claim: wrongful termination; breach of contract, defamation; and intentional interference with contract/prospective economic advantage. All of the causes of action relate to Johnny Burris’ former employment with JP Morgan Chase. According to the Times, in 2013, after Johnny Burris reported JP Morgan Chase’s sales tactics, customer complaints began appearing on his disciplinary records, which are available to the public and to prospective employers through the Financial Industry Regulatory Authority (“FINRA”). As a result of the customer complaints, Johnny Burris had difficulty getting another job as a broker in the industry. Further, after seventeen (17) hearing sessions, the Arbitration Panel denied Johnny Burris’ claims in the entirety.
Johnny Burris subsequently contacted two of the clients who supposedly had initiated the complaints. Upon Johnny Burris’ inquiry, these clients revealed that they had not written the complaints and that the individual who had authored and submitted the complaints was someone from JPMorgan Chase – a claim that JPMorgan Chase ultimately verified. The Times reported that, according to JPMorgan Chase’s December 2015 statement, “one of Mr. Burris’s [sic] former colleagues, Laya Gavin, had, in fact, 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.’” Yet, when asked, both clients said they had no issues with Johnny Burris and that JPMorgan Chase’s description of events differed from their memory of what took place. According to the Times, Carolyn Scott, one of the alleged customers who complained, stated that “she had not written the document, but had signed it without knowing the contents after a JPMorgan employee had told her it was something that could help her ‘get some money back.’”
The SEC protects whistleblowers from retaliation by their employers. The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), which became effective in July 2010, contains new whistleblower provisions that provide substantial incentives and protection for individuals who voluntarily provide information to the SEC concerning securities law violations. Securities violations that can be reported by whistleblowers to the SEC include the following: unregistered offer or sale of securities; insider trading; market manipulation; theft or misappropriation of funds or securities; bribery of foreign officials; filing false or misleading SEC reports or financial statements; Ponzi schemes; abusive naked short selling; fraudulent conduct associated with municipal securities transactions or public pension plans; and other fraudulent conduct.
Under the Dodd-Frank Act, employers are prohibited from retaliating against whistleblowers, which means that the employer may not fire, demote, suspend, threaten, harass, or otherwise discriminate against a whistleblower. A whistleblower who suffers from employment retaliation can sue for 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 incurred.
The SEC’s whistleblower program has awarded more than $54 million to 22 whistleblowers who provided information that yielded a successful enforcement action. The awards are paid out of an investor protection fund that is financed by monetary sanctions paid to the SEC by rule violators.
Lax & Neville LLP has nationally represented small broker-dealers, financial services professionals and securities industry companies in regulatory matters and securities-related and commercial litigation. Additionally, Lax & Neville has extensive experience in successfully handling whistleblower litigation. Please contact our team of attorneys for a consultation at (212) 696-1999.