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Jackie Lawson convinced the US Supreme Court that a law protecting whistle-blowers applies to private companies like Fidelity Investments, but now it will be up to a federal jury in Boston whether she in fact blew a whistle on accounting errors at the mutual fund giant.
Twelve jurors began deliberations at the Moakley Courthouse on Monday after a three-week trial that marks the latest twist in Lawson’s decadelong legal odyssey against Fidelity. The case also offers a rare window into the inner workings of the Boston company, which manages the retirement savings accounts of some 25 million Americans.
Lawson alleges in her lawsuit that she faced harassment and retaliation after she accused Fidelity of using accounting methods that led to charging millions of dollars in excessive fees to fund shareholders. Lawson eventually reported the conduct to federal authorities and sought whistle-blower protection under the Sarbanes-Oxley Act, a law passed after the 2002 Enron scandal in an effort to prevent further financial fraud.
Faced with a hostile work environment, Lawson says she had no choice but to resign in 2007. Her suit contends that as a whistle-blower she is entitled to millions of dollars in back pay and other damages after being forced out.
Fidelity has argued that Sarbanes-Oxley does not apply to mutual fund firms like itself, only public companies. It was a successful tactic until the Supreme Court weighed in and ruled in 2014 that the law extends to private companies.
The high court, however, did not rule on the merits of Lawson’s case. That will be up to the jury, which has heard testimony — veering at times into arcane fund accounting — from current and former Fidelity employees.
While it’s easy to get lost in how exactly the mutual fund giant calculates expenses, the case comes down to this: Was Lawson forced out after raising concerns about financial methodology, or is she an embittered employee who resigned after being passed over for a promotion?
Complicating the case is how under Sarbanes-Oxley it doesn’t matter if fraud actually took place, only that Lawson reasonably believed wrongdoing occurred and reported it, and whether that act led Fidelity to retaliate against her. Under Sarbanes-Oxley whistle-blower rules, Lawson is entitled to back pay and other damages. The Securities and Exchange Commission did not pursue a case against Fidelity on the matter.
In his hourlong closing argument, Fidelity lawyer Bill Kettlewell reiterated that the accounting errors Lawson detected were ones that the company was already aware of, and they were corrected.
“None of the issues amounted to actual fraud,” Kettlewell told the jury gathered in Courtroom One. “A simple error can never amount to securities fraud.”
Kettlewell also argued that while the errors may have potentially added up to tens of millions of dollars in extra expenses to shareholders, they were immaterial at a company that manages more than $1 trillion in assets.
Rather than a whistle-blower, Kettlewell painted a portrait of an employee who did not get a promotion and then became a poor performer under a new boss. Kettlewell rebutted allegations that Fidelity retaliated against Lawson, saying that she continued to get raises and bonuses. The company also offered her a transfer out of the department and a sabbatical.
“She had her own agenda,” he told the jury. “Having a tough boss or a stressful work environment, that’s not harassment.”
But when Lawson took the stand early on in the trial, she recalled how she went from exemplary employee to one who faced untenable working conditions after she began to question Fidelity’s accounting methods. She recalled being yelled at by her supervisor and being given unreasonable workloads.
“The abuse got so bad that I said to them, you know, ‘You’re treating me like I’m not an experienced manager. I’ve been managing people for eight years. Nobody has ever treated me like this before,’ ” said Lawson, according to a transcript of her testimony. “I told them that, you know, ‘The barrage of abuse is just’ — I told them that my head was exploding. I said, ‘You’re treating me like an animal. This is not right.’ ”
During her testimony, Lawson described how she felt like she was ‘working in a minefield’ after she began questioning the company’s methods.
Lawson’s description of a hostile work environment comes as Fidelity chief executive Abby Johnson has vowed to institute a zero tolerance policy on harassment, following the high-profile departures of two fund managers accused of sexual harassment. Another former Fidelity employee, Erika Wesson, has also sued, alleging retaliation after claiming gender bias at the company. (Johnson was not CEO when Lawson and Wesson filed their suits.)
Lawson began working for Fidelity in 1993, and she rose through the ranks from contract employee to senior director of finance. She began noticing accounting irregularities in the spring of 2005, and by December 2006, she filed a complaint to federal authorities under the Sarbanes-Oxley act. During this period, Lawson alleges that Fidelity began to treat her differently, giving her raises and bonuses far below what she had received in the past and eventually giving her poor performance reviews.
During her testimony, Lawson described how she felt like she was “working in a minefield” after she began questioning the company’s methods. What made the period all the more difficult is that she used to describe herself as a “proud” Fidelity employee.
“I really loved working at Fidelity Investments,” said Lawson.“There was a time when people asked me, you know, when you’re in a social setting, ‘Who do you work for?’ And I was so proud. I would be like ‘Fidelity Investments.’ ”
After Lawson resigned, she testified, she has been unable to find another job. She had to rely on her husband’s income, and the couple liquidated their retirement accounts to pay down their mortgage.
Lawson’s lawyer, Laura Studen, in closing arguments portrayed Fidelity as a company that was trying to push out Lawson, knowing it would be difficult to fire her after she claimed whistle-blower protection under Sarbanes-Oxley.
“This was about building a case against Jackie Lawson and ensuring her failure,” Studen told jurors. “You just make her so unhappy, you grind her down, she leaves on her own.”
Studen said that Lawson was simply doing her job as a watchdog, seeing something and saying something.
“What happened, happened because she became a whistle-blower,” said Studen. “People who put money in a mutual fund should care about people like Jackie Lawson.”Shirley Leung is a Globe columnist. She can be reached at email@example.com. Follow her on Twitter @leung.