Bank employee asks judge to uphold whistle-blower lawsuit

Greenwich Time

Debra Friedman, Staff Writer
Published 10:37 p.m., Monday, October 4, 2010

STAMFORD — The attorney for a JPMorgan Chase & Co. employee involved in whistle-blower lawsuit said despite the bank’s attempt to “trivialize” his client’s experience with the company, a judge should allow the case to move forward.

Lawyers engaged in the legal battle, which began in July, have continued to spar over the merit of the lawsuit and Greenwich residentKevin Dillon‘s claims that the financial giant was ignoring deceptive investment strategies by their hedge fund counterpart.

“(JPMorgan) seeks to escape liability by trivializing the rash of retaliatory acts imposed by (Dillon),” according to a recently filed motion. “However, no application of semantics, nor attempts to trivialize the sometimes disturbing conduct (Dillon) faced can justify (JPMorgan’s) actions in this case.”

In the lawsuit Dillon, a client processing specialist with the company’s Greenwich offices, alleges that supervisors at the bank attempted to force him out of his job after he discovered “highly questionable accounting and management practices” of Highland Capital Management LP, a Texas-based hedge fund that receives support services from JPMorgan, according to the lawsuit.

Highland Capital Management is not named in the lawsuit and has adamantly denied all allegations, calling Dillon a “disgruntled employee” who is using the company as a pawn in his lawsuit.

Responding the Dillon’s lawsuit, JPMorgan asked a judge to strike the lawsuit stating that the claims are “legally insufficient” because Dillon was never fired or suspended.

Lawyers for JPMorgan said despite the allegations, Dillon provided no basis for his belief that these practices were “questionable” and failed to point to any regulation or statute that was violated, according to the motion. They also said that after Dillon reported the allegations involving Highland, he received a raise and a bonus.

However, Dillon’s lawyer Mark Sherman said in the newly filed motion that Dillon was subjected to a “comprehensive, prolonged, and often bizarre retaliatory campaign,” that involved limiting his compensation and employment status, destroying his prospects for future advancement, demoralizing and embarrassing him, luring him to engage in illegal or unethical conduct and making him fear for his physical safety, according to the motion. As a result, Sherman said he should be able to collected damages in the case.

In the initial 12-page complaint filed in July, Dillon stated he observed Highland Capital “artificially manipulating” the net asset value of certain funds by cross-trading assets between Highland hedge funds at settlement prices that were deceptively set, back-dating cross-trades to capture a more favorable asset value and placing poor-performing investments in a particular fund called the “Crusader Fund” to shield its other portfolios, among other allegations.

After notifying superiors, Dillon, said his $15,000 bonus was cut by two-thirds and he was not promoted to officer, despite receiving positive reviews and praise before the incident was reported.

In June 2009, after the incident was reported, Dillon also received a “needs improvement” designation on his midyear review. The lawsuit stated that Dillon’s supervisor attempted to force him out by promoting less-qualified employees over him, leaving him out of meetings and intimidating him by discussing the wide array of guns he owned. JPMorgan lawyers have referred to this behavior as “petty slights or minor annoyances,” saying that it does not constitute a claim of retaliation.

The Securities and Exchange Commission has declined to comment about the case. Recently, Sherman secured the largest SEC whistle-blowing award in the country’s history in connection with SEC insider trading allegations that contributed to the demise of Wilton-based Pequot Capital. Sherman would not comment on whether he or his client have been in touch with SEC investigators regarding the complaint’s allegations concerning JPMorgan and Highland.

Oral arguments may be required in this case to determine whether the lawsuit will stand.