U.S. District Court Denies Franklin Resources’ Motion to Dismiss in Former Fiduciary Trust Executive’s Sarbanes-Oxley (SOX) Whistleblower Lawsuit

Share Article

Franklin and Fiduciary Trust sued for retaliatory discharge in violation of Plaintiff’s SOX, Title VII, ERISA and common law breach of contract rights.

We are pleased to announce that the Honorable Judge Paul A. Crotty of the U.S. District Court for the Southern District of New York has denied with prejudice Fiduciary Trust Company International’s and Franklin Resources, Inc.’s motion to dismiss for failure to establish protected activity claims on two notices in the whistleblower lawsuit filed by Gregory A. Fraser, CFA against Fiduciary/Franklin on August 27, 2004 (a Second Amended Complaint was filed on July 25, 2005). In the motion, Fiduciary Trust and Franklin had argued that Mr. Fraser’s four whistleblowing notices did not qualify as protected activity under the Sarbanes-Oxley Act of 2002. Although the Court dismissed two of the notices, Mr. Fraser’s Second and Third Whistleblowing notices were preserved. The Court also sustained without prejudice Mr. Fraser’s request for a jury trial on the preserved SOX claims subject to future guidance from other courts.

In denying Defendants’ motion with prejudice, the Court upheld the following additional charges:

  •         Title VII discrimination for disparate and adverse treatment based on Mr. Fraser’s race and color;
  •      ERISA discrimination for unequal treatment in denying Mr. Fraser certain ERISA benefits that other employees were permitted to receive; and
  •      Breach of contract based on Fiduciary’s failure to invoke its own contractual employment policies during the handling of Mr. Fraser’s whistleblower complaints and subsequent firing.

With the Court’s Decision and Order, Mr. Fraser’s lawsuit will proceed against Fiduciary Trust and Franklin, and will now enter the discovery phase. The lawsuit alleges that Mr. Fraser was wrongfully terminated three years ago on March 7, 2003 “under a false pretext in retaliation for his repeated notices and complaints sent to his supervisors about a continuous pattern of fraudulent business practices” that he regularly witnessed at Franklin and Fiduciary Trust, its wholly-owned subsidiary.

The Second Whistleblowing Instance alleges that Fiduciary engaged in unfair dealing and treatment of its clients when the decision by the N.Y. head-office to sell WorldCom bonds from certain separately managed accounts was intentionally withheld from the rest of the firm, resulting in substantial losses in client accounts that continued to hold the securities after WorldCom defaulted on its debt and filed for bankruptcy protection.

In the Third Whistleblowing Instance, Mr. Fraser alleges that Fiduciary and Franklin included intentional misrepresentations and misstatements and omitted certain relevant disclosures in regulatory filings, which led to the defrauding of Fiduciary and Franklin shareholders in connection with Franklin’s $825 million acquisition of Fiduciary in April 2001. The claim asserts that Fiduciary improperly included $16 billion of a United Nations pension fund account which was misclassified as part of Fiduciary’s purported $50 billion in assets under management in filings with the U.S. Securities and Exchange Commission despite the fact that Fiduciary does not manage this account, maintains only a limited advisory relationship with the United Nations pension fund and does not have discretionary authority or the ability to make final investment decisions for this account. Furthermore, it alleges Fiduciary earns a flat annual advisory fee that is not based on the average market value of the account, and on a relative percentage basis, is considerably lower than the fee earned on its discretionary managed accounts.

The Court’s decision, which reaffirmed and expanded Judge Richard M. Berman’s earlier Decision and Order, severely contradicts the virtues of Fiduciary’s public statements of reassurance that prematurely concluded, “it is not reasonable to believe” Mr. Fraser’s allegations and “we [Fiduciary] believe[s] the complaint to be without merit.” Generally, clients and shareholders of global companies have exhibited growing concerns regarding the effectiveness of fraud and internal risk management controls given the outbreak of corporate scandals that have shaken investors’ confidence.

The Sarbanes-Oxley Act was enacted to restore investor trust by improving accountability in corporate America through mandatory changes in corporate governance and accounting practices and affording whistleblower protection to employees of publicly traded companies who disclose information relating to fraud against shareholders. Mr. Fraser joins a growing list of corporate whistleblowers that disclosed improper business and accounting practices at their firms. This list includes Sherron Watkins (Enron), Cynthia Cooper (WorldCom), James DeVage (HealthSouth), Roger Barnes (Fannie Mae) and Matthew Whitley (Coca-Cola). According to the PricewaterhouseCoopers Global Economic Crime Survey 2005, the number of reported incidents of corporate fraud has increased sharply in recent years, with financial misrepresentation notices up 140% since 2003.

Mr. Fraser, who is a 9/11 survivor, stated that his case is a matter of corporate responsibility, ethics and equal treatment. According to Mr. Fraser, “I was victimized because I refused to participate in the culture of dishonesty that was pervasive throughout the company. It was equally disturbing to experience racial bias and to be unfairly denied the same promotional opportunities afforded to non-minorities at the firm.”

We want all Franklin clients, shareholders and employees to know that we have repeatedly attempted to resolve this matter with Fiduciary and Franklin. We have acted to protect Mr. Fraser’s rights and interests, and will continue to do so in the future.

The case involved is Fraser v. Fiduciary Trust Company International, Franklin Resources, Inc., et. al., 04 CV 06958, Southern District of New York.

The Decision and Order can be accessed from the following Department of Labor web address:


To obtain copies of pleadings, register for Public Access to Court Electronic Records (PACER) via the following web address:


The PricewaterhouseCoopers Global Economic Crime Survey 2005 can be accessed via the following web address:


For More Information, Contact:

Friends and Supporters of Gregory Fraser

Telephone: +1 646 373 7758

# # #

Share article on social media or email:

View article via:

Pdf Print

Contact Author

Friends and Supporters of Gregory Fraser

+1 646 373 7758
Email >