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Small Town Canadian Values versus JPMorgan Chase

EDITOR, CORPORATE CRIME REPORTER – NOVEMBER 25, 2014 LINK TO ARTICLE

She grew up in a small town in northern British Columbia near the Alaska border.

She studied philosophy at the University of British Columbia and then law at Cornell Law School before joining JPMorgan Chase on Wall Street.

What was it in her background that led her to blow the whistle on what may be one the biggest corporate crimes of recent times?

Was it some ethics course she took in college or law school?

“I actually think it was because I came from a small town – Terrace, British Columbia,” Alayne Fleischmann told Corporate Crime Reporter in an interview last week. “I was raised with this idea that ultimately you have to do the right thing. It was just simple things like — you can’t take money from people. We are talking about pension plans and retirement funds, things people are relying on at a time when they don’t have another income. I just grew up with a value that a lot of people have — and that is, it’s okay to do well, but you can’t do that at other people’s expense.”

Earlier this month, journalist Matt Taibbi published a remarkable story in Rolling Stone magazine titled – “The $9 Billion Witness: Meet JPMorgan Chase’s Worst Nightmare.”

In it, Taibbi introduces to the world Alayne Fleischmann — former JP Morgan Chase securities lawyer turned whistleblower.

“Ask her where the crime was, and Fleischmann will point out exactly how her bosses at JPMorgan Chase committed criminal fraud,” Taibbi writes. “It’s right there in the documents; just hand her a highlighter and some Post-it notes – ‘we lawyers love flags’ – and you will not find a more enthusiastic tour guide through a gazillion-page prospectus than Alayne Fleischmann.”

“She believes the proof is easily there for all the elements of the crime as defined by federal law – the bank made material misrepresentations, it made material omissions, and it did so willfully and with specific intent, consciously ignoring warnings from inside the firm and out.”

“She’d like to see something done about it, emphasizing that there still is time. The statute of limitations for wire fraud, for instance, has not run out, and she strongly believes there’s a case there, against the bank’s executives. She has no financial interest in any of this, no motive other than wanting the truth out. But more than anything, she wants it to be over.”

Over and over again, defense lawyers say that these are difficult cases to prove.

Fleischmann isn’t buying it.

“You hear all the time that the government can’t take on the big banks, that the lawyers just can’t do it,” Fleischmann told Corporate Crime Reporter. “The lead investigator in this case from Sacramento was Richard Elias. He knew it inside out. He knew he had an incredible case. So, I thought these guys are going to run with it and it will be dealt with publicly exactly the way I’ve always been trained to believe the justice system will work.”

Are you convinced it will work?

“After I met with them, I saw how they did the initial settlement, where the facts were washed away. And at the same time, I saw other cases like the HSBC case, which was an incredible money laundering case. And it looked like they had evidence against individuals. And yet they just settled it for money. They have these money settlements, none of the facts come out and you find out afterwards that there were individuals they could have gone against.”

“We see this again and again. At some stage I felt like — even if they have a strong case, you can’t expect they will go forward against individuals. It will be one of these fines. And all the facts will be wiped away.”

What led you to speak out?

“During the time they had been having these settlement discussions, my lawyer had been contacted by the criminal investigators. And they wanted me to hold open a time between December 15 and Christmas 2013 to meet with them. These were the Department of Justice criminal investigators out of Sacramento. The civil case was in settlement negotiations.”

“When the civil case was settled in November 2013, the meeting I was supposed to have with the criminal investigators never happened. I was never contacted. As January, February and March went by and I hadn’t been contacted and I was watching all of these other cases, I started thinking — I don’t think this is going to go anywhere.”

“In May, Holder made a speech talking about too big to jail. He said — we don’t know if it’s criminal, we don’t have enough evidence. I just thought — well, maybe this speech would make sense in 2008 or 2009. But it’s 2014. I know they have a pile of evidence and they have had it — I had been talking to the government for over two and a half years. At that point, I just stopped believing that they were going to move forward. It wasn’t an intentional choice. It was more — at some stage, I just stopped believing it.”

“I thought — if I don’t come forward, then I’m actually a part of this. And I don’t want to spend the rest of my life knowing that I knew this information and didn’t come forward.”

And your agreement with JPMorgan was not to speak out?

“I signed a standard confidentiality agreement. There is a question of when you are reporting a crime how that relates to your confidentiality agreement.”

When you decided that you wanted to speak out, what were your options?

“It was quite difficult. Already, I had been working with the government. As a whistleblower, you expect to talk with the government and the government will run with it. But not only was I going to blow the whistle on JPMorgan, but I was also going to express a lack of faith in the government moving forward. I needed someone who would tell the story and tell it fully.”

Did you go to Richard Elias and say — I’m thinking about speaking out, what is the status of the criminal case?

“Elias was a civil investigator. He had moved on to private practice at that time and the civil case had been settled. I did try to make some efforts to reach out. But even if they told me — we are still investigating, there is nothing keeping them from settling the case with one of these deferred prosecution agreements. Obviously, they don’t have to ask me about that. And I’m sure they would never tell me that’s what they are doing.”

Didn’t you have a contact with the Department of Justice?

“They contacted my lawyer at one stage. And then nothing was heard back.”

Who is your lawyer?

“I don’t want to get him more involved in this than he already is.”

Is it a U.S. based lawyer?

“Yes. I had a lawyer representing me in the criminal case. He has no involvement or knowledge of any of this.”

When you decided to speak out, what made you choose Matt Taibbi?

“I’ve been reading his work for years. He does a very good job of taking difficult subjects and condensing them down into something that is fundamentally correct but in a way that people can read it and understand it. Since my main point was that this caused so much damage to investors and to the economy at large, I felt that people deserved to understand what happened. And he was the best person to tell people.”

Did you know him before you reached out to him?

“No, not at all. In fact, it was interesting trying to get through to him.”

When did you reach him?

“May 2014. After I watched Eric Holder, I went forward and tried to do things normally. But I knew I wanted to find a way to do something different. Matt at that time was no longer with Rolling Stone. And he hadn’t started with his new project yet. I was trying to find a way to get in touch with him without putting up anything publicly.”

How did you finally reach him?

“I found a lawyer that he had worked with. And that lawyer was kind enough to first believe me and then conference me in with him.”

Do you come from a family of lawyers?

“No. My mother is a retired high school teacher. And my dad is a retired salesman. They are watching all of this in a bit of shock.”

What made you decide to go to law school?

“I’ve had a long time interest in human rights work and international law. I went to Cornell Law School because they have an incredible international law program. I worked on an international human rights textbook.”

“That’s why I became a lawyer in the first place. The securities law practice was a surprise. I really enjoyed it and found it interesting. It was considered very respectable when I went in. I had no idea of what was going to happen over time. Because of my student loans, I went into securities law. Unfortunately, as a Canadian, I wasn’t eligible for the loan forgiveness program. As a lawyer, I realized I had to do some work at one of these places to pay off my loans. So I went to Cadwalader and JPMorgan Chase.”

Since this story has come out, have you heard from any of the prosecutors or from the government about the case?

“Nothing from the government or from JPMorgan. I have heard from some of these private litigants who are obviously interested now in getting in touch with me. They couldn’t do that before. That is something I’m dealing with now.”

What is that?

“Figuring out the best way to come forward with my testimony.”

Can you testify in these cases against JPMorgan Chase?

“That’s something they are working through now. Obviously, the confidentiality agreement can’t trump a subpoena. These litigants were sometimes in discovery and trying to find me. And JPMorgan was telling them that I wasn’t relevant to their cases.”

Have you been subpoenaed?

“Not yet. People are still catching up with the story.”

Why didn’t you report under the SEC’s whistleblower program?

“When I blew the whistle at JPMorgan back in 2006 and early 2007, these award programs didn’t exist. Although I told the SEC in early 2012 about what I saw on the GreenPoint purchase, I didn’t know that these loans had actually been sold in large amounts to investors without proper disclosure until the Department of Justice told me much later. So, if I was ever eligible, I didn’t know about it.”

“Personally, I think these financial programs misunderstand that a lot of whistleblowers actually give up their jobs and livelihoods in order to do the right thing, regardless of any long-shot chance of making money. I – and, I’m sure, many others – think it is much more important for the Department of Justice to prosecute the reported crimes and protect the public, than to pay out large whistleblower awards. Anyone considering reporting wrongdoing watches with great interest what happens to prior whistleblowers. To me, the number one deterrent to taking this risk and reporting wrongdoing is watching the SEC and Department of Justice simply collect fines and whitewash the information that previous whistleblowers have given up so much to disclose.”

What impact has the publication of this story had on your career?

“I haven’t had a chance to sort through this yet. Obviously, it shuts off some things, which I knew would happen. But hopefully there will be a place for me at the end of all this. I’m happy people are still interested in talking. So, I’m still talking with people. I’m trying to respond to all of the people who have contacted me.”

Will you be working in Canada?

“I’m trying not to think too hard about any particular thing or where I would want to be and see if something comes my way that will let me do the kind of work I’m interested in. One thing that I knew when I did this was this would be tied to my name forever. It’s finding some way that I can do interesting work where this is still a positive instead of an impediment.”

It’s unusual for Canadians to come to the United States to study law and then go back to Canada to practice. Is there anything particularly Canadian about your story?

“I’ve had a tremendous response from Canadians. I was listening to an interview between Sam Seder and Matt Taibbi and they were joking that the real problem here is that they put a Canadian in the middle of all of this process.”

“It’s really more about the values I grew up with. And I know that many people in the United States have similar values. I think it’s more about what certain people think is important.”

Ideally, what kind of work do you want to be doing?

“I want to do something useful. That’s why I went into law. Whether that’s the legal side, or being involved as a plaintiff’s counsel or as an advocate, or whether it’s switching over and doing the human rights work that I had always been interested in. I have this feeling that something will come through and it will be just right.”

“If worse comes to worst, they will always take me back in Terrace. My mother is still up there and I have family and friends there.”

[For the complete q/a transcript of the Interview with Alayne Fleischmann, see 28 Corporate Crime Reporter 45(10), November 24, 2014, print edition only.]

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