SFO launches inquiry into Gupta firms, including Greensill finance links

Move to investigate suspected fraud and money laundering prompts collapse of Liberty Steel rescue deal putting 3,000 UK jobs at risk

The Serious Fraud Office has launched an investigation into the financing of Sanjeev Gupta’s metals empire, including its links to Greensill Capital, in a move that immediately caused the collapse of a rescue deal for Liberty Steel and raised fears over thousands of British jobs.

The UK’s anti-corruption agency said it suspected fraud, fraudulent trading and money laundering related to the financing of Gupta Family Group Alliance (GFG), the loose grouping of steel and metals trading companies controlled by Gupta.

The investigation prompted renewed fears for the struggling GFG company Liberty Steel, which employs about 3,000 people in the UK.

San Francisco-based investor White Oak Global Advisers on Friday pulled out of a deal to provide finance to GFG. It had last week agreed terms to lend to operations in both the UK and Australia, but both were subject to due diligence checks.

“As with any regulated financial institution, we are not in a position to continue discussions with any company that is under investigation by the Serious Fraud Office for money laundering,” White Oak said in a statement.

Globally there are as many as 35,000 people in related GFG companies, including large mining and steelmaking operations in Australia, the US, France, eastern Europe and India.

Gupta has been scrambling to secure financing for his companies since March, when his key lender, Greensill Capital, collapsed. The supply chain finance provider, set up by the banker Lex Greensill, had lent Gupta’s companies as much as $5bn (£3.6bn).

The SFO on Friday said that its investigation included GFG’s financing arrangements with Greensill’s UK arm.

The SFO inquiry has been running covertly for several months, said a person familiar with the investigation. Covert investigations are often used in cases where destruction of evidence may be a risk.

In a short statement, the SFO said: “The SFO is investigating suspected fraud, fraudulent trading and money laundering in relation to the financing and conduct of the business of companies within the Gupta Family Group Alliance (GFG), including its financing arrangements with Greensill Capital UK Ltd. As this is a live investigation, the SFO can provide no further comment.”

Gupta had previously approached the UK government for a £170m emergency loan. The request was rejected because of fears the money would be moved outside the UK via GFG’s opaque and complex corporate structure. A government source said the SFO inquiry vindicated a possible plan to step in to save Liberty Steel operations only if they fell into insolvency.

Steel mills in Rotherham and Stocksbridge, both in South Yorkshire, have been put under particular pressure by the collapse of GFG’s main lender, as well as the decline in demand from the aerospace industry during the coronavirus pandemic. Gupta’s companies employ a further 2,000 people elsewhere in the UK, including in an energy company and a Scottish aluminium smelter.

A steelworkers’ union, Community, said the SFO inquiry was a “concerning development” but added that “this must not detract from the complete focus of all parties on securing our members’ jobs and protecting these crucial strategic businesses”.

Gupta built the GFG empire rapidly with the help of Greensill’s loans. However, since Greensill collapsed GFG’s financing has come under heavy scrutiny, including in relation to the practice of borrowing against invoices for potential future clients. GFG has previously said that it borrowed from Greensill on the basis of “prospective receivables”.

David Cameron, the former prime minister who was paid by Greensill and lobbied on his behalf, on Thursday told MPs that reports about GFG’s financing were “clearly very disturbing if true”.

In March, Richard Fuller, a Conservative MP, in parliament asked the business secretary, Kwasi Kwarteng, whether the reports about GFG warranted the SFO’s involvement. On Friday Fuller said Gupta should now provide details on his companies’ corporate structure and financing, as well as clarity over his contingency plans for the steel plants.

Responding on Friday to news of the SFO investigation, a GFG spokesperson said: “GFG Alliance notes the UK Serious Fraud Office’s announcement that it has opened an investigation into GFG Alliance. GFG Alliance will cooperate fully with the investigation. As these matters are the subject of an SFO investigation we cannot make any further comment.

“GFG Alliance continues to serve its customers around the world and is making progress in the refinancing of its operations which are benefiting from the operational improvements it has made and the very strong steel, aluminium and iron ore markets.”

The administrators for Greensill’s UK arm, Grant Thornton, declined to comment.

Contributor

Jasper Jolly

The GuardianTramp

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