Should this fraudster have been prosecuted? | AccountingWEB

Should this fraudster have been prosecuted?

I was intrigued to read the FSA disciplinary report on former banker Ravi Sinha.

To cut a long story short, Mr Sinha was a leading light in the City of London.  Formerly with Goldman Sachs he moved to a newer organisation, JC Flowers, which was keen to make a name for itself, where he acted as CEO.

Demonstrating his confidence in the company Mr Sinha borrowed 9 million euros to invest with the firm.  But he was unable to meet the loan repayments - despite his salary of over £800,000 per annum - and in 2009 he dishonestly obtained a total of £1.36 million for himself by raising false invoices to a client company.

The FSA have banned him for life from working in the City and fined him £1.5 million on top of requiring him to repay the £1.36 million (so the total penalty is £2.86 million).  Since he has only recently emerged from personal bankruptcy the chances of the FSA seeing their £2.86 million look pretty slim.

But interestingly the police are not pursuing any criminal proceedings - so Mr Sinha is not at risk of going to prison.

There seems to be a certain amount of confusion about why that is according to a press report.

There are two ways of looking at this.  On the one hand Mr Sinha has suffered very grave consequences in terms of his financial situation and his career and one might think he has suffered enough for his wrongdoing.  On the other hand the financial penalty demanded by the FSA is unlikely to be paid and under normal circumstances a person found to have obtained a large amount of money by fraud would be expected to be imprisoned.

What would be your verdict?



Too many unprosecuted financial frauds    3 thanks

alistair_king | | Permalink

I am unsurprised by this failure to prosecute. It is part of a long-standing pattern...

The 2008 crisis happened because of fraudulent misrepresentation. Its a matter of public record (congressional hearings) that banks selling mortgage derivatives didn't merely act against their clients' interests by shorting the same product they were selling to their clients. They actively chose to use credit records to select bad mortgages to offload into the derivatives to maximise the gains they would make by shorting them. Whilst still describing it as AAA product to the client. They got the AAA rating by withholding payment from the credit rating agencies until they knuckled under. But nobody got prosecuted.

Then there are the banks that place their proprietary (own name) trading desks next to the their flow (client) trading desks. Then when the client places a buy order, the prop trader goes to market to buy the shares in the bank's name at the best price. The bank then sells the shares to the client at the price in the buy order, pocketing the difference as profit. Then they charge a brokerage commission on top. There is a similar process to strip profit from the customer for sell orders...

Then we have the current Eurozone crisis. 5 major US banks own 97% of the Greek bond credit swaps. This exceeds their capital. So if there were to be a credit event... oops. But these same banks have a very strong influence over ISDA (the fox guarding the henhouse) and will be able to lean on it so that a haircut to 70% will be declared to be not a credit event and all those people (European banks, European governments, hedge funds, etc.) who think they have hedged their bond risk will find that they hold worthless pieces of paper. This already killed MF Global when ISDA declared that a 50% haircut was not a credit event. - check the Q&A press release for 31st October.

Speaking of MF Global... $1 billion of funds in client accounts vaporised.So the money disappeared but the authorities are avoiding calling it fraud or theft...

Then there were the lawsuits on rigging in the silver market...

Then there were the banks that helped Greece mischaracterise and hide its debt (whilst simultaneously using their knowledge to short Greece)...

Then there is the multi-billion dollar business of paying insiders for expert knowledge on their companies (looks like insider trading to me).

I could go on. The scale and quantity of the examples is unbelievable.

Banks and other financial insititutions have got to the stage where they regard fines for misbehaviour as just another business expense because the profits they make from this misbehaviour far outweigh the fines.

The bonuses are immense. There's no risk downside because it's all "other people's money". And nobody gets prosecuted.

ShirleyM's picture

I agree with everything you say Alistair    3 thanks

ShirleyM | | Permalink

Yes, this person has lost out financially, but there is no deterrent, and no justice. He gambled and lost. Every gambler knows he is gambling and could lose his money, but this was illegal and there has been no punishment for the illegality.

Who pays in the long run? The people who lost the money pay initially, but they will pass that loss onto others in increased prices/reduced costs/reduced employees to regain the lost profit, but in the end it is the public (the ultimate end user of everything) who pays. The public like to know that there is a strong deterrent to stop others jumping on the bandwagon and repeating the exercise!

odd    2 thanks

The Black Knight | | Permalink

that a high profile character/case should not be prosecuted for theft/fraud of £1.36M...

Has he repaid this to the victim...No

He has been punished for a bad investment decision but has he been punished for the crime...No

Perhaps it was not in the public interest or they could not be bothered because it was a friday.

I think the law ought to try and be consistent especially as MP's were sent to prison for much lesser amounts.

I guess it all depends whether the papers make a fuss or not.

its a question of getting

carnmores | | Permalink

the witnesses to testify?

Business practices ...

JC | | Permalink

Completely agree but ..

Why are we surprised about his underlying business practices in the first place ?

After all he came from the Goldman Sachs stable of corruption - one of the most unethical, pervasive/canerous influences in banking today with far reaching tentacles into all manner of other areas (i.e. politics). Just get a roll call of ex Goldman Sachs old boys club and look at their roles in todays society

And yet they get away with it ...... which says a lot about todays environment

Furthermore, why haven't Goldman Sachs been sent the bill for Greece; essentially they engineered the situation in the first place so they should pay for the outcome ?


weaversmiths's picture

High Salaries    1 thanks

weaversmiths | | Permalink

Why cant someone live comfortably and quietly (and legitimately)  on £800.000 per annum????  It seems that the high earners just want more and more - doesn't matter whose it is.  From the bottom looking up the financial income scale it appears that the world has gone quite mad and few are answerable. Dont members think it is all so corrupt or are we to admire the clever accountants who engineer all this?  Or is this just the opinion of a cranky  old woman?


ShirleyM's picture

@weaversmiths    1 thanks

ShirleyM | | Permalink

Sadly, I agree. There are some people who are just plain greedy, and will never have 'enough'. I hope their granny knows she is likely to be sold down the river .... if they can find someone willing to buy, or maybe granny was killed off for the inheritance.  ;)

It is corrupt, but how often do we see them brought to justice? It seems losing their (not) hard earned cash is sufficient punishment!!!!!!!!

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