The UK's Serious Fraud Office 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 Alliance), including its financing arrangements with Greensill Capital UK Ltd., the SFO said in a post on its website May 14.
SFO cannot currently say how long the investigation will last or which period is under investigation, but updates will be posted on its website, a spokesman said.
GFG Alliance said it will cooperate fully with the investigation. "GFG Alliance notes the UK Serious Fraud Office (SFO)'s announcement that it has opened an investigation," a spokesman said in an emailed statement.
"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 benefitting from the operational improvements it has made and the very strong steel, aluminum and iron ore markets."
Liberty Steel, the third largest steel manufacturer in the UK, has nine sites across England, Scotland and Wales, producing flat and long products. Its UK rolled products capacity is around 3 million mt/year while its global steel rolling capacity is around 20 million mt/year. It also produces iron ore in Australia.
Iron ore, ferrous scrap and steel prices are all at record highs as government-led stimulus has boosted steel demand for construction and automotive steel in many nations.
'Intermittent' UK steel operations
Greensill Capital, the major financier of GFG's Liberty Steel Group, Alvance Aluminium and SIMEC energy subsidiaries, collapsed in March leaving GFG operations with extremely tight cash flow. This led to reduced working at some of the steel businesses, notably in the UK, where plants were described as operating "intermittently" as some raw material suppliers and their insurers reduced their exposure to the group. The group's financing had been based on the supply chain finance model which works with short term credits and a quick supplier payments turnaround.
The opening of the SFO investigation coincides with a UK parliamentary committee probe launched April 28 into the government's approach to supporting the UK steel industry and, in particular, the case of Liberty Steel. The committee is due to discuss its findings later this month.
The parliamentary committee stated during the launch of its investigation that UK taxpayers are reported to be exposed to more than GBP1 billion ($1.39 billion) debt from the collapse of Greensill Capital via three government guarantees, including a state-backed coronavirus lending scheme, "which enabled Greensill to advance hundreds of millions of pounds to companies linked to GFG Alliance."
On March 28, the government rejected a request by GFG executive chairman Sanjeev Gupta for a GBP170 million loan to support Liberty Steel. According to a statement by the parliamentary committee, the funds were refused due to concerns over GFG Alliance's "opaque accounting procedures," and use of "high-risk financing methods."
Three French units of Alvance Aluminium, GFG Alliance's aluminum subsidiary, entered judicial administration late April, and this has been followed by the granting of creditor protection for its Liege-Dudelange steel operations in Belgium and Luxembourg, a GFG spokesman confirmed May 14.
