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Jennifer Sharkey and the Quest to Protect Big Bank Whistleblowers

Written By Geoffrey Pike

Posted October 15, 2015

whistleblowerJPMorgan Chase recently won a victory in U.S. District Court. Judge Robert Sweet dismissed a lawsuit against the financial giant over allegations of firing a whistleblower.

The case involves Jennifer Sharkey, who was fired from her job with JPMorgan in 2009. She claims that she had spoken out about an Israeli client who generated approximately $600,000 per year in business.

Sharkey – who was a vice president – claims that she spoke out against the client for involvement in mail fraud, bank fraud, and money laundering. This came right on the heels of the Bernie Madoff scandal who was a client of JPMorgan.

This was the second time that U.S. District Judge Sweet dismissed the lawsuit. Sharkey’s lawyer has indicated that they plan to appeal.

Despite Sharkey’s claim that her pleas were ignored about the potential wrongdoing, the judge stated that JPMorgan demonstrated that Sharkey’s release was due to performance related issues.

The judge ruled that Sharkey did not meet the necessary whistleblower standards laid out in the Sarbanes-Oxley Act that was passed in 2002. It is still not clear how Sarbanes-Oxley protects consumers or what its purpose is other than making compliance much more expensive for businesses.

Whenever there is some kind of business scandal, the federal government likes to swoop in with new legislation. It inevitably increases the cost of doing business and just attempts to prevent the last scandal from happening. It never addresses the future scandals that will happen.

Let’s remember that with the Bernie Madoff scandal, the SEC didn’t even uncover it despite being tipped off. It was only after the damage had been done, and others exposed it, that the SEC came to the rescue.

In this particular case with Sharkey, it is hard to say if she has a legitimate complaint or if she is just trying to get revenge and collect some money for being fired. Maybe she really was a bad employee.

A Whistleblower’s Market

The government is constantly preaching the importance of protecting whistleblowers. This doesn’t mean that everyone should be given a free pass just because they make a claim.

When Obama was first running for president, and even when he was first in office, he was constantly talking about the need to protect whistleblowers. He talked about the need for more transparency.

Unfortunately, when Obama or other government officials talk about transparency and protecting whistleblowers, they are only referring to businesses. If someone blows the whistle on government wrongdoing at a high level, then they will more likely end up in prison.

Also, the big banks, including JPMorgan Chase, are part of the establishment and tightly connected to the government. That is why they get the bailouts. So while Jennifer Sharkey may or may not have been fired for bad performance, it is hard not to give her some benefit of the doubt because she is dealing with a major bank.

When government officials talk about the need to protect whistleblowers – whether they mean or not – it is generally well received by the public. People want to know that others will not be punished for their honesty. They want to know that others will be punished for their dishonesty.

The problem here is that many people are looking for the government to enforce it. But who gets to make the decision? You will get all of the same problems you get in politics. The decisions will be political based on who has the right connections.

And what if the ones making the decisions are the ones engaging in wrongdoing? Are they going to protect the whistleblowers who report their wrongdoing? I think that question answers itself.

Just as the free marketplace has a way of rewarding honesty, it has a way of protecting whistleblowers. Profits and losses send a signal if a business is meeting consumer demand with sustainable prices. Profits tell a business that it is doing a good job. Losses indicate that something needs to change or else the business isn’t going to last long.

Whistleblowing actually fits into this equation. If a company is engaged in wrongdoing, it is more likely to get exposed in a free market environment. It is actually more likely to get away with wrongdoing with agencies such as the SEC overseeing it.

In addition, if a company such as JPMorgan Chase really is ignoring wrongdoing by clients, it is eventually going to hurt its profitability, especially if it is part of the culture there. The problem is that these companies are protected by the government and given bailouts when they produce losses.

The SEC has been a total failure when it comes to keeping honesty in business. If anything, the agency enables dishonesty. It is the free marketplace, where consumers decide based on buying and selling, that encourages honesty.

In addition, with our modern age of social media and instant communication, it is much easier for honest people to be heard. A legitimate complaint posted on social media can often lead to reduced business for the company in question.

Unfortunately, the government itself is not judged by profits and losses. The government gets its money by forcing others to pay. You cannot act as a customer and take your business elsewhere if you are not happy. And don’t expect protection for whistleblowers in the government if they are exposing wrongdoing that is taking away your liberty.