FSA slaps record fine on ex-JC Flowers boss for fraud

LONDON (Reuters) - The Financial Services Authority has slapped a record fine on leading City financier Ravi Sinha for an invoicing scam when he was in charge of the European operations of U.S. buyout giant JC Flowers.

Former Goldman Sachs (GS.N) banker Sinha was one of JC Flowers' leading lights, spearheading attempts to buy stricken bank Northern Rock and insurer Friends Provident, but he admitted to the fraud in 2009 after hitting financial trouble.

The Financial Services Authority (FSA) on Tuesday fined him 2.87 million pounds, its largest penalty for a general fraud case.

Police decided not to launch a criminal case against Sinha because they did not have the full support of the company, a City of London police source told Reuters.

A spokesman for JC Flowers said while the firm did not request a full criminal investigation, it would have "co-operated fully" had the police launched a probe. It reported the fraud to the FSA and the Serious Organised Crime Agency.

Lawyer Sara George, partner at law firm Stephenson Howard, told Reuters the jail sentence for a criminal conviction in cases such as these would typically be between three and four years.

HIGH FLYER

Sinha was one of the key right-hand men of Christopher Flowers, another former Goldman banker who set up a private equity firm and made billions from turning around troubled banks, including some controversial deals.

He was paid $1.2 million (760,000 pounds) a year -- at least on a par with many of the country's leading business figures -- but ran up debts after making his own investments in JC Flowers deals, and borrowed nearly 9 million euros (7 million pounds) during just 3 months in 2008.

Sinha's financial woes deepened when the credit crisis struck. The performance of JC Flowers's investments deteriorated and income from those investments dried up.

Sinha has to repay 1.37 million pounds he pocketed from concocting fraudulent invoices between April and October 2009 and was fined 1.5 million pounds by the FSA.

The FSA also banned him for life from working in the regulated financial services industry.

"Sinha exploited his position of trust as CEO to fraudulently obtain significant sums for his personal benefit," said Tracey McDermott, acting director of enforcement and financial crime at the FSA.

"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," she said.

Sinha did not return calls for comment.

Sinha was reported to the FSA by Callum McCarthy, the regulator's former chairman, shortly after he arrived as chairman of the European arm of JC Flowers in November 2009.

The probe related to the attempted flotation of a Luxembourg-based wealth management firm owned by JC Flowers, the Sunday Times reported.

JC Flowers immediately investigated the situation, suspending and then terminating Sinha's employment. The FSA has made no criticism of the group's conduct, it said in a statement.

(Editing by David Cowell)