Whitleblower Claims Rise as Wall Street Fires Employees

 

Even senior Wall Street bank employees are finding the new whistleblower laws beneficial. Wall Street banks fought tooth and against the Dodd-Frank whistleblower protections. The big banks claimed that protecting employees who report violations to outsiders would compromise their own supposedly robust internal reporting and compliance programs. But critics responded that Wall Street banks simply want to keep their violations hidden so that they can continue doing business as usual.

One such critic is Clifford Jagodzinski, a former risk officer at Morgan Stanley Smith Barney. Mr. Jagodzinski recently filed suit against MSSB claiming he was fired for blowing the whistle on a star wealth manager who allegedly “flipped” preferred securities in order to generate commissions. He was such a big producer at Bank of America Merrill Lynch that MSSB reportedly guaranteed him $25 million for signing up (“Ex-MSSB exec: I was fired for whistleblowing,” InvestmentNews).

Mr. Jagodzinski says he was told to stop blowing the whistle on the star advisor because the firm wanted to protect significant source revenue. This adviser and his team managed assets in excess of $1 billion and generated over $14 million in revenue for the firm, according to the article.

When Mr. Jagodzinski told his supervisor that these and other violations should be reported to the Financial Industry Regulatory Authority, the supervisor bristled and Mr. Jagodzinski was fired less than 10 days later.

Whistleblower claims and complaints of retaliation are rising. The IRS recently approved a $104 million award to former UBS AG banker Bradley Birkenfeld for blowing the whistle on UBS’s illegal encouragement of secret offshore accounts by U.S. taxpayers.

The SEC is expected to pay $452 million to whistleblowers across the country. Whistleblowers can collect from 10 percent to 30 percent of the SEC’s recovery.

Page Perry, LLC is an Atlanta-based law firm with over 170 years of collective experience maintaining integrity in the investment markets and protecting investor rights.