Alayne Fleischmann
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Alayne Fleischmann is a lawyer formerly employed by
JPMorgan Chase JPMorgan Chase & Co. is an American multinational investment bank and financial services holding company headquartered in New York City and incorporated in Delaware. As of 2022, JPMorgan Chase is the largest bank in the United States, the ...
. She is known as the
whistleblower A whistleblower (also written as whistle-blower or whistle blower) is a person, often an employee, who reveals information about activity within a private or public organization that is deemed illegal, immoral, illicit, unsafe or fraudulent. Whi ...
who provided evidence resulting in a $9 billion settlement by JPMorgan Chase to the United States Federal Government. The case has been called one of the most significant white-collar crime cases in US history.


Early life

Fleischmann was born and raised in
Terrace, British Columbia Terrace is a city located near the Skeena River in British Columbia, Canada. The community is the regional retail and service hub for the northwestern portion of British Columbia. With a current population of over 12,000 within municipal boundarie ...
, Canada. After leaving Canada, she attended
Cornell Law School Cornell Law School is the law school of Cornell University, a private Ivy League university in Ithaca, New York. One of the five Ivy League law schools, it offers four law degree programs, JD, LLM, MSLS and JSD, along with several dual-deg ...
and then began working on
Wall Street Wall Street is an eight-block-long street in the Financial District of Lower Manhattan in New York City. It runs between Broadway in the west to South Street and the East River in the east. The term "Wall Street" has become a metonym for t ...
. Prior to entering the financial sector she had worked in human rights.


Securities law

But, once working in securities law, she discovered she had a passion for it. She felt that, in those days, it was a "very respectable" field, and that there was "nothing shady about" it. In 2006, after working for a few years at a law firm, she was hired by Chase as a transaction manager—a sort of quality control officer. Her main function was to ensure that Chase did not purchase bad loans. After working there for a few months, a new manager was hired as head of the "diligence" group. This group's purpose was to review then clear loans. Very quickly, Fleischmann encountered problems with the manager. She testified in a
United States Department of Justice The United States Department of Justice (DOJ), also known as the Justice Department, is a federal executive department of the United States government tasked with the enforcement of federal law and administration of justice in the United State ...
deposition that, this manager—within the organization, technically a superior—instructed her and others in the firm to stop any e-mail contact with him. Fleischmann said: "If you sent him an e-mail, he would actually come out and yell at you." "The whole point of having a compliance and diligence group is to have policies that are set out clearly in writing. So to have exactly the opposite of that – that was very worrisome."


Home loans

Late 2006, shortly after the manager started the "no e-mail" policy, the diligence group, including Fleischmann, were called upon to evaluate a $900 million packet of
home loans A mortgage loan or simply mortgage (), in civil law (legal system), civil law jurisdicions known also as a hypothec loan, is a loan used either by purchasers of real property to raise funds to buy real estate, or by existing property owners ...
. GreenPoint was named as the
mortgage A mortgage loan or simply mortgage (), in civil law jurisdicions known also as a hypothec loan, is a loan used either by purchasers of real property to raise funds to buy real estate, or by existing property owners to raise funds for any pu ...
originator. Almost at once, Fleischmann and several of her colleagues who were also diligence managers found serious issues with this packet of loans. One problem was the "suspiciously" old dates on many of them. Ordinarily, banks wish to produce securities from loans as quickly as possible, ideally within two to three months. The loans from GreenPoint at the time were seven or eight months old. This indicated that the deal had been rejected by Chase or another bank earlier, or else were "early payment defaults" or EPDs (loans that had been previously sold to another institution and had been returned after the borrowers had defaulted on several payments). A review of random loan samples by Fleischmann and her team discovered approximately 40% were based on incomes that were overstated. The normal tolerance level by Chase was 5%. After Fleischmann and others stated their objections to these bad loans, the number-crunchers, who once were concerned about the loans, started to alter their reports. The diligence team concluded that there would likely be a large number of defaults in the GreenPoint package loans. The report stating this was provided to several high-ranking executives. The GreenPoint package was eventually approved. In February 2008, as part of a series of layoffs, Fleischmann was fired.


Canada

Fleischmann returned to Canada. In early 2012, the
U.S. Securities and Exchange Commission The U.S. Securities and Exchange Commission (SEC) is an independent agency of the United States federal government, created in the aftermath of the Wall Street Crash of 1929. The primary purpose of the SEC is to enforce the law against market ...
contacted her as part of an investigation into Chase. She stated that she would tell them all she knew about Chase's systemic fraud, in particular, GreenPoint. However, the SEC was more concerned with Chase's dealings with a company called WMC. In late 2012 and early 2013,
civil litigator Civil law is a major branch of the law.Glanville Williams. ''Learning the Law''. Eleventh Edition. Stevens. 1982. p. 2. In common law legal systems such as England and Wales and the United States, the term refers to non-criminal law. The law rel ...
s from the U.S. attorney's office in the
Eastern District of California The United States District Court for the Eastern District of California (in case citations, E.D. Cal.) is a federal court in the United States Court of Appeals for the Ninth Circuit, Ninth Circuit (except for patent claims and claims against the ...
interviewed her. Fleischmann provided lead attorney Richard Elias and his team with complete information about the directive not to send e-mails, the sabotage of the diligence process, bullying by her superiors, and that written warnings were ignored. She assumed her statements would lead to prosecution. However, Eric Holder's expected September 24, 2013 announcement of civil-fraud charges against Chase were canceled. Later news reports state that
Jamie Dimon James Dimon (; born March 13, 1956) is an American billionaire businessman and banker who has been the chairman and chief executive officer of JPMorgan Chase – the largest of the big four American banks – since 2005. Dimon was previously on ...
had called
United States Associate Attorney General The associate attorney general of the United States is the third-highest-ranking official in the U.S. Department of Justice. The associate attorney general advises and assists the attorney general and the deputy attorney general in policies rela ...
Tony West to ask that the case be settled out of court. According to ''
The New York Times ''The New York Times'' (''the Times'', ''NYT'', or the Gray Lady) is a daily newspaper based in New York City with a worldwide readership reported in 2020 to comprise a declining 840,000 paid print subscribers, and a growing 6 million paid ...
'', Dimon had offered $3 billion to settle out of court, which was rejected, then offered more, which was also rejected. As a bargaining chip, Fleischmann's evidence was used by the Department of Justice to persuade Dimon to offer approximately $9 billion as a settlement. From 2012 to 2013, she
articled Apprenticeship is a system for training a new generation of practitioners of a trade or profession with on-the-job training and often some accompanying study (classroom work and reading). Apprenticeships can also enable practitioners to gain a ...
at a
Calgary Calgary ( ) is the largest city in the western Canadian province of Alberta and the largest metro area of the three Prairie Provinces. As of 2021, the city proper had a population of 1,306,784 and a metropolitan population of 1,481,806, makin ...
law firm. This is a prerequisite to practicing law in Canada.


References


External links

*
Matt Taibbi Matthew Colin Taibbi (; born March 2, 1970) is an American author, journalist, and podcaster. He has reported on finance, media, politics, and sports. A former contributing editor for ''Rolling Stone'', he is an author of several books, co-host o ...
,
The $9 Billion Witness: Meet JPMorgan Chase's Worst Nightmare
', November 6, 2014, ''
Rolling Stone ''Rolling Stone'' is an American monthly magazine that focuses on music, politics, and popular culture. It was founded in San Francisco, San Francisco, California, in 1967 by Jann Wenner, and the music critic Ralph J. Gleason. It was first kno ...
'' *
Matt Taibbi and Bank Whistleblower on How JPMorgan Chase Helped Wreck the Economy, Avoid Prosecution
', November 7, 2014, '' Democracy Now!''
JP Morgan Chase Whale Trades: A Case History of Derivatives Risks and Abuses: Hearing before the Permanent Subcommittee on Investigations of the Committee on Homeland Security and Governmental Affairs, United States Senate, One Hundred Thirteenth Congress, First Session, March 15, 2013, Vol. 1Vol. 2
{{DEFAULTSORT:Fleischmann, Alayne Canadian women lawyers Living people Cornell Law School alumni People from Vancouver People from Terrace, British Columbia JPMorgan Chase employees Year of birth missing (living people)