October 2, 2009 - David Zhang, a former JP Morgan Chase & Co. employee, has filed a lawsuit in federal court in Manhattan, accusing the company of retaliating against him after he reported overvalued commercial loans in its real estate loan portfolio and past fraudulent conduct by recently-hired former executives of Bear Stearns.
According to the complaint, beginning in March 2008, Mr. Zhang, who was then employed as an operations professional in JP Morgan's newly formed Principal Real Estate Department, discovered that almost a third of the department's loans were overvalued. That information (and the resulting loss) had been fraudulently withheld from the firm's financial reports by a managing director seeking to save his job. Mr. Zhang, who had come to JP Morgan from Bear Stearns in the middle of 2007, also disclosed to JP Morgan the past fraudulent practices at Bear Stearns of its head of mortgage trading whom JP Morgan hired to run its securitization business. Mr. Zhang also complained of potential false testimony to Congress by Alan Schwartz, the former Bear Stearns CEO who had also recently joined JP Morgan.
Mr. Zhang alleges that, after raising these concerns to various compliance and other officials within the company, as well as to the Securities and Exchange Commission and the Senate Banking Committee, he was stripped of certain duties and later fired in June 2008.
Zhang v. JP Morgan Chase and Co., United States District Court for the Southern District of New York, Action No. 09-CV-8380 (AKH) (filed 10/2/09).
Daniel J. Kaiser and William H. Kaiser of Kaiser Saurborn & Mair, P.C. in New York City represent Mr. Zhang.
Kenneth J. Turnbull and Meghan Cherner-Ranft of the New York City office of Morgan, Lewis & Bockius LLP represent JP Morgan Chase.