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 will heighten concerns over the future of jobs at Liberty Steel.
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.
It includes its financing arrangements with Greensill Capital UK Ltd, the supply chain finance provider set up by the banker Lex Greensill. Previous court representations have suggested Greensill lent Gupta’s companies as much as $5bn (£3.6bn).
Since Greensill collapsed in March, Gupta has been scrambling to secure financing for various parts of the group of companies. Last week, GFG was understood to be nearing a £200m deal for a refinancing of Liberty Steel UK, which employs about 3,000 people. The deal, with the San Francisco-based White Oak Global Advisers, was understood to require the approval of Credit Suisse, a bank that had heavily backed Greensill.
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.
Globally there are as many as 35,000 people in related companies, including large mining and steelmaking operations in Australia, the US, France, eastern Europe and India.
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.
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. Credit Suisse was approached for comment.