SOX Whistleblower Protections Do Not End After a Final Paycheck

December 14, 2015

A recently filed administrative charge demonstrates the importance of extending financial whistleblower protections past when an employee is terminated. The allegations involved in this whistleblowing case tell the classic retaliation story: a financial adviser resists pressure from his supervisors to unlawfully place the interests of his company above his client and quickly ends up fired. What is new about the allegations made by this whistleblower is what his former employer did after his termination, and what those actions mean for his charge of retaliation.

Putting Clients Above the Company

Johnny Burris was a financial adviser in Arizona with the Sun City West Branch of JPMorgan Chase (“JPMorgan”), where he dealt primarily with local retirees. According to the New York Times, in mid-2012, Mr. Burris secretly recorded his supervisors urging him to sell the company’s mutual funds over those of their competitors, in violation of U.S. securities laws. Mr. Burris resisted this unlawful pressure from his supervisors and complained repeatedly about being forced to sell what he viewed as “unsuitable, expensive and underperforming investment products.” In a matter of months, JPMorgan terminated Mr. Burris’ employment without explanation. After his termination, Mr. Burris took the evidence that he gathered about these securities violations, including the recordings he had made, and reported the company to the U.S. Securities and Exchange Commission (“SEC”).

In a charge Mr. Burris filed with the U.S. Occupational Safety and Health Administration (“OSHA”), he alleged that his termination was the result of his refusal to push inferior funds at the expense of his clients. In the Financial Industry Regulatory Authority (“Finra”) broker database, JPMorgan stated that Mr. Burris had been dismissed for failing to “follow firm procedures” and mistakenly describing an order as “unsolicited.”

From the information presented by the New York Times, the evidence appears to favor Mr. Burris’ account. His former clients, interviewed by the New York Times, deny the company’s allegations. Moreover, JPMorgan reportedly expects to pay upwards of $200 million in fines to the SEC to resolve charges related to the self-dealing conduct reported by Mr. Burris.

Post-Termination Retaliation

According to Mr. Burris, JPMorgan’s retaliation against him did not end with his wrongful termination. After the company terminated him, Mr. Burris alleges that complaints from former clients appeared on his publically available broker disciplinary record. Such complaints constitute a very serious impediment to securing future employment as a broker – as Douglas Schulz, a securities industry expert from Invest Securities Consulting, told the New York Times, “[m]ost brokerage firms won’t consider hiring a broker with three or more such complaints, no matter what the disposition,” noting that the mere filing of such complaints constituted “a very serious black mark.”

Inquiries made by the New York Times revealed, however, that the clients purportedly responsible for submitting the complaints against Mr. Burris were not actually the authors of those complaints. Instead, according to at least two of Mr. Burris’ former clients, JPMorgan had obtained their signatures on complaints written by one of the company’s employees. In fact, both of these former clients told the New York Times that they had not even read the letters of complaint. One client was unable to read or write, and the other signed the complaint without knowing its contents following an assurance by a JPMorgan employee that doing so may help her “get some money back.”

Mr. Schulz expressed shock at these actions to the New York Times, noting that “[w]ritten customer complaints can only be written by a client. It’s a very serious document that triggers all kinds of regulatory requirements. No broker should be writing them.” Mr. Burris alleges that these fraudulent complaints, seemingly fueled by retaliatory animus in violation of the Sarbanes-Oxley Act (“SOX”), exacerbated his already difficult job search.

Interpreting SOX Whistleblower Protections

According to a decision issued earlier this year by the U.S. District Court for the Southern District of New York, an employer’s adverse actions taken after an employee’s termination may violate SOX’s whistleblower protections. In Kshetrapal v. Dish Network, LLC, et al., the defendant’s actions hurt the whistleblower’s job search by successfully pressuring another company to rescind its employment offer to the whistleblower. Relying on the Department of Labor’s interpretation of SOX, as well as the public policy underlying the statute, the New York court held that SOX’s whistleblower protections extend to former employees.

This holding bodes well for Mr. Burris, whose whistleblower complaint is still pending in front of OSHA because, even if OSHA were to determine that JPMorgan did not retaliate against Mr. Burris when it terminated his employment, it could at the same time find that JPMorgan did retaliate against Mr. Burris by authoring false client complaints.

Doing Good Deserves Protection

This case serves as a reminder to whistleblowers and employers that SOX whistleblower protections do not end with an employee’s final paycheck. The protections against retaliation provided by SOX, as interpreted by the Department of Labor, provide robust protections to whistleblowers during and after their employment – and for good reason. If true, the conduct opposed and reported by this whistleblower constituted a violation of securities laws that benefited one of the largest banks in the world at the expense of vulnerable retirees in Arizona.

Individuals who are willing to stand up against this type of investment advisor fraud at the risk of not only losing their jobs but being blackballed afterward need and deserve protection so that they can protect the public from unscrupulous tactics such as these.

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