Deutsche Bank Whistle-Blower Raised Flags About Another Bank

Tammy McFadden spent most of her career far from Wall Street, in banks and back offices in Jacksonville, Florida. She was let go three times, including last year by Deutsche Bank AG.

Now she’s poised to become a bank-compliance celebrity.

McFadden is the whistle-blower who went public last month, telling the New York Times she had notified federal officials about her concerns with the Deutsche Bank accounts of President Donald Trump and his son-in-law, Jared Kushner.

It’s not her first time accusing a major bank of turning a blind eye to activities in the accounts of rich clients. She made similar allegations more than a decade ago against Bank of America Corp., in litigation that parallels the legal battle she’s pursuing against Deutsche Bank.

Democratic lawmakers are eager to hear more about what she saw at the German lender, with two House committees already digging into its dealings with the president and his family members. The FBI has also expressed interest in her story, her lawyer told the Times. McFadden stands to capture the sort of attention that once went to the accountant who flagged problems in Enron’s books, Sherron Watkins, if she has anything to add.

That’s a significant “if.” McFadden’s utility to lawmakers may hinge on her credibility and motivations, as is often the case with would-be whistle-blowers. Many allegations of corporate wrongdoing emerge from workers who’ve been dismissed, as she was, making it tempting to doubt the purity of their intentions. Their cases often fade away when allegations or legal funding don’t hold up. Few whistle-blowers end up like Watkins, celebrated on the cover of Time magazine.

McFadden’s previous flag-raising episode is detailed in documents filed in a federal court in Jacksonville, Florida, part of the suit she filed against Bank of America in 2006. Calling her 2005 dismissal from the bank’s compliance department a case of wrongful termination, she said bank management ignored her warnings about compliance problems in the accounts of wealthy foreigners. She also expressed frustration, according to her lawyer, at her inability to track the results of so-called suspicious activity reports, which banks file to alert the government of unusual transactions in client accounts.

The filings show that McFadden persisted despite setbacks (her first lawyer insisted on withdrawing) and weathered disclosures about her work history, including the bank’s assertion that she avoided taking phone calls by claiming to have “phone phobia.” Along the way she clashed with bosses at a new banking job she held for less than a year, according to court papers. She ultimately reached a settlement with Bank of America. Terms weren’t disclosed.

McFadden’s lawyer in the Deutsche Bank matter, Brian McCafferty, declined to comment.

Contacted by telephone, McFadden said the Deutsche Bank matter was “very different” from the Bank of America case. She otherwise declined to comment about either matter or about any interest by federal authorities. The FBI didn’t respond to requests for comment.

Representatives of Deutsche Bank and Bank of America also declined to comment.

McFadden, known as Tammy Hill before getting married, entered the banking industry through a side door. She took mass communications courses at the University of Georgia and also studied fashion merchandising, doing stints at retailers including K-Mart, The Limited and Rich’s. In the 1990s, she made the jump to marketing and financial-services work.

She landed a job at Bank of America in Jacksonville in 1998. After six years in support roles, she became an associate in the compliance department.

McFadden, now 55 years old, was generally liked by her colleagues there and met expectations overall, a manager said later in a deposition. But she was overwhelmed by the volume of work, the manager said. While the unit was responsible for examining unusual account activity, McFadden’s job was administrative in nature and she didn’t exhibit the analytical skills required to advance, the manager testified.

After six months on the job, McFadden and her immediate colleagues learned that their group would be phased out and that only a small number of them would be promoted. After 11 months in the group, McFadden was informed she didn’t make the cut and would be let go. Her manager offered to help her find another position in the bank, according to the filings.

Shortly afterward, McFadden sounded an alarm internally about her department — saying, among other things, that Bank of America’s know-your-customer program was deficient. She flagged activity in the accounts of some wealthy foreign clients of the bank, the complaint said, without providing more specifics.

She took those concerns to the top, emailing then-Chief Executive Officer Ken Lewis and other senior officials and claiming that her department could be in violation of some of the fundamental rules governing bank compliance, the Bank Secrecy Act and the USA Patriot Act.

About two weeks later, McFadden told supervisors she needed some time at home. Over several days, she downloaded some 2,400 documents from Bank of America’s internal computer system to her personal Hotmail account -– including the same sort of sensitive client information protected by the Bank Secrecy Act — according to the bank’s filings in the case.

McFadden, in the filings, denied the mass removal of bank records, saying she downloaded emails that had to do with personal business.

McFadden, who is African-American and was 41 years old when she was let go, filed an equal-opportunity complaint, alleging she was the victim of race and age discrimination. In her 2006 complaint, she also alleged she was wrongfully terminated after she raised concerns about the bank’s compliance department.

The bank denied it discriminated against her. An African-American co-worker of McFadden’s was promoted around the time their job classification was phased out, according to court documents.

As for the compliance claims, the executive overseeing the entire department said that as a result of a failed audit at the unit in 2004, compliance associates in McFadden’s department were being actively encouraged to raise questions about problematic accounts as part of a clean-up effort.

McFadden kicked off her 31-month legal battle herself, filing an early version of her complaint on her own, or “pro se.” She had a relative drop off a copy with a security guard at Bank of America headquarters in Charlotte, North Carolina. Because the complaint hadn’t been served properly, the bank found about it only after McFadden filed a notice of default.

Forced to restart the process, she hired a local lawyer, who then quit a year later. The judge in McFadden’s case urged the lawyer to see the case through, but he refused -– offering, even, to return her $2,500 retainer. The lawyer, who declined to comment for this article, explained his reason for pulling out to the judge in private, not in open court.

By 2007, with her battle against Bank of America still simmering, McFadden landed a job as an assistant branch manager with Fidelity Bank, a Florida lender unrelated to the mutual-fund giant.

Within a few months, McFadden received behavior and performance warnings, according to materials Fidelity Bank turned over the Bank of America’s lawyers in the proceedings.

Fidelity managers accused McFadden of being a troublemaker in the office and prying into conversations that didn’t involve her. Her managers also criticized her for relaying complaints she said were raised by other staff members, who, when questioned by managers, denied having voiced such concerns.

McFadden’s Fidelity managers also wrote her up for service infractions including failing to make eye contact with customers, one of whom came into the bank to collect a prize from the bank’s “ice cream social drawing.” Asked to sign a form memorializing the problematic behavior, she refused, saying she disagreed strongly, according to her Fidelity Bank personnel file, which was filed as part of the Bank of America matter.

Her managers convened an October 2007 conference call to address her concerns about the write-up. She “became confrontational with management” during the call and “refused to acknowledge that immediate improvement was possible,” according to her personnel file. She was terminated after the call, having been on the job six months.

McFadden pressed on with her case against Bank of America. A court-ordered attempt at mediation resulted in an impasse.

By November 2008, with a trial scheduled for the following year, McFadden received a job offer from Deutsche Bank. The Bank of America suit was settled within weeks, its terms confidential.

The settlement allowed McFadden to move on to her new loan-operations job without her new employer learning of her litigation against Bank of America, a general concern her lawyer had raised a year earlier. Though the Bank of America litigation was public, her new employers at Deutsche Bank weren’t aware of it, according to a person familiar with the matter.

In 2013, after four years in various jobs at Deutsche Bank, McFadden joined the anti-money-laundering unit of the lender’s private banking arm, returning to work she’d done a decade earlier at Bank of America.

According to the Times, in 2016 McFadden reviewed a series of transactions involving the account of Jared Kushner’s real estate company. The bank’s internal software system had identified the transfers as money sent from the Kushner account to Russian nationals. McFadden drafted a suspicious activity report, but managers from Deutsche Bank’s private banking group, where Trump and Kushner did their banking, overruled her and the SAR was never filed, the Times reported.

McFadden also complained to her superiors that the accounts of Trump, his family members and other politically exposed individuals weren’t receiving the in-depth scrutiny they deserved, according to the Times.

McFadden was eventually moved to another department, she said, and fired in 2018. The newspaper said she has since shared information about her experience at Deutsche Bank with the Securities and Exchange Commission and other regulators. The SEC runs a program that rewards people who come forward to expose wrongdoing.

Disclosures of potentially suspicious activities at the bank are “of deep concern to us,” said Representative Adam Schiff, who said his House Intelligence Committee, in conjunction with the Financial Services Committee, are examining transactions involving the bank. “We would want an opportunity to talk” to current or former employees with knowledge of the matter, Schiff, a Democrat, said last month.