Whistle Blowing and Sarbanes-Oxley

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Assignment 1: Whistle Blowing and Sarbanes-Oxley

LEG500

23 July 2014










Introduction

Keith Edwards was an employee of JP Morgan Chase Bank from 2003 2008. During
this period, he served as the banks assistant vice president with responsibilities for
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oversight and management of the bank's government insuring unit. As with many
whistleblowers, Mr. Edwards was known to be a loyal employee and felt that there was
wrong-doing within his agency. Additionally, like many internal whistleblowers in the
past, Mr. Edwards unsuccessfully attempted to right this wrong within his leadership
chain of command.

As an employee of JP Morgan Chase Bank within the government insuring unit in
Louisiana. Based on information provided by Mr. Edwards, the government (the court)
found that JP Morgan Chase Bank violated the False Claims Act by knowingly
originating and underwriting non-compliant mortgage loans submitted for insurance
coverage and guarantees by the Department of Housing and Urban Development's (HUD)
Federal Housing Administration (FHA) and the Department of Veterans Affairs (VA).
These violations were alleged to occur as early as 2002. Since these loans were easier for
participants to be approved for loans that they would have not qualified for without HUD,
FHA, or VA assistance. Due to this violation, the government (listed agencies)

The Edwards cases revolved around mortgages issued by JP Morgan that were guaranteed
by the Department of Housing and Urban Development through the Federal Housing
Authority (FHA), and by the Department of Veterans Affairs. Thanks to this government
backing, the mortgages could carry a lower interest rate than would have been demanded
in private markets, given the riskiness of the borrowers.

Mr. Edwards originally sued in January 2013 under the federal False Claims Act, which
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lets individuals sue government contractors and suppliers for allegedly defrauding
taxpayers. The U.S. Department of Justice later joined Mr. Edwards as a plaintiff against
JP Morgan Chase Bank.

These government agencies said it ultimately had to cover millions of dollars of losses
after some of the bank's loans went sour, resulting in evictions and foreclosures
nationwide.
As a result of Mr. Edwardss whistleblower information, he was awarded $63.9 million
dollars, and JP Morgan Chase Bank agreed to pay the government agencies $614 million
dollars in settlements.

Based on all the information provided, I found Mr. Edwards to be very justified in the
action he took against JP Morgan Chase Bank. There were no indicators that Mr. Edwards
presented his findings to the federal government for his personal gain. He presented the
infractions to management within JP Morgan Chase prior to pursuing the issue further;
when nothing was done to correct the problem, he exposed the information externally. I
do not believe that Mr. Edwards would be protected under the Sarbanes-Oxley Act since
his exposure did not directly involve

The case is U.S. ex rel. Edwards v. JPMorgan Chase Bank NA et al., case number
13-cv-00220, in the U.S. District Court, Southern District of New York.

The United States is represented by Preet Bhara and Christopher B. Harwood.
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Edwards is represented by David G. Wasinger of The Wasinger Law Group PC.

JPMorgan is represented by Alexander H. Southwell of Gibson Dunn.

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References

(2014, March 15). A $64m question; Whistleblowers. Economist, (8878), 69, Retrieved
from http://elibrary.bigchalk.com

Brown, L. "Whistleblower represented by local attorney in JPMorgan settlement; The
Associated Press contributed to this report." St. Louis Post-Dispatch. 2014, February 07:
B4.

Chaudhuri, Saabira "J.P. Morgan Whistleblower Gets $64 Million; Keith Edwards
Provided Tips to U.S. Government Over Home-Loan Insurance." Wall Street Journal
(Online). 2014, March 07: n/a.

Department of Justice (DOJ) Documents / FIND. (2014, February). JPMorgan Chase to
Pay $614 Million for Submitting False Claims for FHA-insured and VA-guaranteed
Mortgage Loans Retrieved from http://elibrary.bigchalk.com

William D Cohan "Wall Street Whistleblowers ; Cover Story." Financial Times; London.
2014, May 31: 14.