Former JC Flowers chief fined £2.8m after invoicing scam

Wednesday 1st February 2012

The FSA has fined the former chief executive of JC Flowers & Co UK, Ravi Shankar Sinha, £2.867m for fraudulently obtaining £1.367m.

The money came from an un-named company owned by a private equity fund advised by JC Flowers, by means of a fictitious invoicing scheme.

Sinha, a former Goldman Sachs banker, was said to have lost money during the credit crunch. He was the British chief executive for JC Flowers between May 2005 and November 2009, during which time he led its ultimately abortive bids to buy Bradford & Bingley, Northern Rock and Friends Provident.

At JC Flowers he earned  $1.2m basic salary, but had borrowed nearly $9m for investment purposes.

In response to his deteriorating financial position, between February 17 and October 26 2009, Sinha issued invoices to a company, in which the JCF Funds had invested, for fees payable to himself, to which he knew he was not entitled. 

In order to secure payment of the invoices, Sinha deliberately misled the company’s CEO by claiming that the payments had been authorised and approved by JC Flowers UK, when no such authorisation or approval had been sought or given. In addition, Sinha dishonestly concealed from his own company the fact that he had received the payments.

JC Flowers fired Sinha in 2009 and alerted the FSA.

The financial penalty consists of £1.367m disgorgement and a punitive element of £1.5m.  Sinha is also prohibited from performing any function in relation to any regulated activity in the financial services industry. The FSA makes no criticism of JC Flowers.

Sinha, now bankrupt, is said by the FSA to regret having let people down. It rejected his complaints that it had ‘prejudged his case’ and had been ‘determined to punish him severely for his misconduct’.
 
Tracey McDermott, acting director of enforcement and financial crime, said: “Sinha exploited his position of trust as CEO to fraudulently obtain significant sums for his personal benefit. He engaged in a dishonest, deliberate and sustained course of misconduct which lasted for several months. Such behaviour has no place in the financial services industry.

“Sinha becomes the latest in a long line of dishonest individuals who have found themselves facing substantial fines and being banned from working in financial services.

“Those who take on the responsibility of being an approved person should be in no doubt about our commitment to take the strongest action to tackle such behaviour, wherever we find it.”