Ex-employee files whistle-blower suit against Fidelity
A former Fidelity Investments fund manager has sued the company, claiming he was fired for ''whistle-blowing activities'' after calling attention to alleged violations of federal securities laws.
In his suit filed May 6 in federal district court in Boston the former manager and research analyst, Jonathan M. Zang of Boston, claims he was fired in May 2005 after seven years with the Boston mutual fund giant, serving as portfolio manager of various ''select'' mutual funds that invest in utilities, chemicals, natural gas and other sectors.
A Fidelity spokeswoman, Anne Crowley, said "the claims by this individual are without merit and we will vigorously defend against this suit.''
Crowley also noted that a similar case Zang filed with a branch of the Labor Department that protects whistleblowers was dismissed last year, a decision recently upheld by an administrative law judge. Zang has sought a review of that decision.
According to his complaint, in 2005 Zang claims he was asked to review a securities registration statement and told his Fidelity superiors of "material inaccuracies and omissions,'' problems he felt violated rules meant to protect shareholders against fraud.
Zang told his superiors, and later his collegues in a widely-distributed e-mail memo, that the company's disclosures ''overstated the connection between a Select fund's performance and the compensation of the Select fund's portfolio manager,'' according to his complaint.
Zang also claimed that Fidelity was operating what he called "veiled index funds,'' which charge fees as if they were actively managed but in reality are largely the same as lower-cost index funds.
He later e-mailed his concerns directly to Fidelity's top managers, including Abigail Johnson, a member of the company's controlling Johnson family who at the time ran its investment unit FMR Co.
Fidelity eventually changed some disclosures about compensation as a result of Zang's concerns, his complaint states, but also began to critize his job performance and called his e-mail "unacceptable and unprofessional.''
His e-mail, Fidelity later told Zang in a written warning, violated its rules on electronic communications.
The company terminated him effective July 15, 2005, according to the complaint, which Fidelity later explained was part of a management reorganization of FMR Co.
But while others who left in the reorganization received severance pay, the complaint states, Zang did not, allegedly because of activities that should have been protected under securities rules.
Zang seeks to be reinstated to his prior position and other awards including including back pay, punitive damages, and attorneys fees, the complaint states.
(By Ross Kerber, Globe staff)
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