JC Flowers' former UK boss fined £2.9m in fraud case

Ravi Sinha submitted false invoices to a JC Flowers company in a desperate attempt to recoup multi-million pound investment losses made at the height to the credit crunch.

Despite the Financial Services Authority finding Mr Sinha had acted "fraudulently" he is to escape criminal prosecution after JC Flowers decided not to request a prosecution.

Sources at City of London Police said they were keen to investigate but were concerned the case would be a waste of public money without JC Flowers' full co-operation.

The private equity group responded, saying it would co-operate if the police launched an investigation.

The row is particularly embarrassing for Flowers as its European chairman is Sir Callum McCarthy, former chairman of the Financial Services Authority.

The investment group is actively involved in the UK banking sector having bid for Northern Rock and as part-owner of UK building society Kent Reliance.

Mr Sinha's case was reported to the FSA by JC Flowers after he was found to have submitted £1.4m of fraudulent invoices to a company in the JC Flowers' portfolio.

The FSA report found Mr Sinha engaged in a "dishonest, deliberate and sustained course of misconduct which lasted for several months".

He undertook the fraud after falling behind in payments on a €9m (£7.5m) loan. On five occasions in 2009 Mr Sinha invoiced an unnamed company a total of £1.4m.

The first instalment was presented as a loan, the others as invoices for "advisory fees". On all occasions he told the company, called Company A by the FSA, he was authorised by JC Flowers to charge the sums.

The fraud came despite Mr Sinha earning an annual salary of $1.2m (£762,000) with a bonus of around $1.3m. In his submissions to the FSA, Mr Sinha admitted to the wrongdoing but challenged the level of fines brought against him.

He said he had not benefited from his wrongdoing as the sum he had stolen from JC Flowers was less than the bonus, or profit share, he had forfeited when he was sacked.

Mr Sinha was declared bankrupt in August last year, although he has since been discharged. It is not certain whether he has the funds to pay the £1.4m in reparation and £1.5m fine levied by the FSA.

JC Flowers founder Christopher Flowers is understood to have personally reimbursed Company A the money it lost as a consequence of the fraud.

The action against Mr Sinha marks the latest in a series of hard-hitting enforcement actions by the FSA.

Last week, the City watchdog fined David Einhorn and his hedge fund, Greenlight Capital, £7.2m for insider dealing on Punch Tavern shares. It also fined the company's compliance officer and its JP Morgan Cazenove broker.

Tracey McDermott, FSA acting director of enforcement and financial crime, said: "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."