"Too Big to Jail?"

16 January, 2014 | Posted By: Rakis Christoforou

By Rakis Christoforou - BBA, CPA/ABV/CFF, MCSI, CGMA, ACFE

As the Cyprus economy is yet to improve, there are thousands of Cypriots leading lives of quiet desperation: without jobs, without resources, without hope.
Who is to blame? Was it simply a result of negligence, of the kind of inordinate risk-taking commonly called as a “bubble,” or was it the result, at least in part, of fraudulent practices, of financial scandals involving sound risks the fundamental weaknesses of which were intentionally obscured?
If it was the former—if the financial crisis is due, at worst, to a lack of caution—then the criminal law has no role to play in the aftermath. If the financial crisis was in no part the handiwork of intentionally fraudulent practices by high-level executives, then to prosecute such executives criminally would be “scapegoating” of the most shallow and despicable kind.
But if, by contrast, the financial crisis is in part the product of intentional fraud, financial crime and scandals, the failure to prosecute those responsible must be judged as another failure of the justice system. It would not be striking to anyone in our country, to see once again not a single high-level executive or official to be successfully prosecuted in connection with the recent financial crisis since we have experienced financial disasters and scandals in the recent past and no one was ever convicted. One possibility, already mentioned, is that no fraud was committed. This possibility should not be discounted. Every case is different, and I, for one, have no opinion about whether criminal fraud was or was not committed in any given instance.
But the stated opinion of some government officials, politicians from most political parties, as well as others is not that no fraud/financial crime was committed. Quite the contrary.
It is apparent that the financial institutions and the Central Bank had a part in creating the conditions that encouraged the approval of high risk loans in the real estate market and the increase of the capital base of financial institutions from funds from unsuspected investors. Banks were providing loans to companies and individuals with low incomes who might have previously been regarded as too risky to warrant a loan.
As new evidence comes to light with respect to numerous scandals, the signs of misconduct were almost everywhere to be seen. Without giving specific examples, as most cases are now under investigation, the point is that, in the aftermath of the financial crisis, the prevailing view of many people is that the crisis is in material respect the product of scandals and probably fraud involving high ranking officials of: companies, financial institutions, government, political parties, etc. But it seems that the general consensus is that we don’t go after the big companies, at least not criminally, because they are too big to jail and our fragile economy and system might collapse if this happens; and we don’t go after the known individuals, because that would involve the kind of years-long investigations that as a country we do not have the experience or the resources to pursue.
But at the same time a poor citizen can easily be convicted for a minor wrongdoing.
To a judge, who takes an oath to apply the law equally to rich and to poor, this excuse—labelled the “too big to jail” excuse—should be disturbing, frankly, in what it says about the apparent disregard for equality under the law.
In conclusion, I want to stress again that I do not claim that the financial crisis that is causing so many of us so much pain and despondency was the product, in whole or in part, of fraudulent misconduct and/or financial crimes. But if it is—as various officials and other people assert that it is—then the failure of the government to bring to justice those responsible for such colossal financial crimes bespeaks weaknesses in our judicial system that needs to be addressed.
The future deterrent value of successfully prosecuting individuals far outweighs the prophylactic benefits of imposing internal compliance measures that are often little more than window-dressing. It is about time that our justice system seeks support from the right professional financial investigators in order to proceed with an in depth examination of each one of the alleged recent financial crimes/scandals and bring to justice those who are proved to be responsible.

(Rakis Christoforou is the founder of RC Business Valuation & Forensic Accounting Ltd, specialising in the areas of business valuation for the determination of a business worth, and financial forensics involving financial investigations, litigation support on complicated financial issues and damage calculations. The company is also involved in assisting businesses in their debt restructuring and negotiation with banking institutions. For information contact or visit )