LONDON (Within the Law) - Talks of a rescue deal for Sanjeev Gupta’s beleaguered metals empire collapsed after the Serious Fraud Office launched an investigation into suspected fraud.
The SFO says it is looking into ‘the financing and conduct of the business of companies within the Gupta Family Group Alliance (GFG), including its financing arrangements with Greensill Capital UK’.
The announcement caused White Oak Global Advisors to withdraw its interest. The company had agreed to provide around AU$430m (£236m) in emergency funding for the company’s Australian steelworks and was poised to offer a £200m loan for its UK steel operations.
GFG was already in trouble after the collapse of its main backer, Greensill Capital, the company for which David Cameron recently found himself in hot water. This setback raises further questions about the future of the conglomerate which includes Liberty Steel and employs 35,000 people around the world.
The SFO has been under pressure to launch an investigation after reports in the Financial Times that GFG provided suspicious invoices to Greensill in return for capital. GFG has denied the allegations while Greensill was not obliged to check the invoices.
The FT revealed that a series of companies named in the invoices sent to Greensill denied ever having done businesses with the group. Gupta would later tell the SFO that one of them had been listed as a ‘prospective customer’ and financing had been provided on that basis.
Covert investigation
According to the FT, the SFO launched a covert investigation about a year ago and has been talking to whistle-blowers. Disclosing an investigation publicly is a relatively rare move for the SFO. It usually only happens in cases with an overwhelming public interest or market requirements.
This investigation promises to be highly politically sensitive for a number of reasons. First is the involvement of Greensill Capital. Although there is no suggestion of wrongdoing on their part, in this instance, they are the subject of a separate inquiry by the Treasury Select Committee over the lobbying scandal. The FCA is also investigating its collapse.
The SFO also has plenty to prove after recent travails including the collapse of its case against two former Serco operatives for failing to share evidence with the defence.
The conduct of the organisation’s head, Lisa Osofsky, has also come under scrutiny due to her communications with a private investigator representing the accused in a major international bribery case.
(Written by Tom Cropper, edited by Klaudia Fior)
She, and her organisation, need a big win and they need it sooner rather than later.
For their part, the SFO says they do not comment on ongoing investigations, while GFG has pledged to fully cooperate with the investigation.
For now, all eyes turn to the future of the company and thousands of jobs in the UK. With White Oak withdrawing their interest, the future of the UK’s third-largest steel producer Liberty Steel hangs in the balance once more. Gupta has sought a £170m state bailout to save his business which employs 3,000 people. The government rejected the request.
The company insists talks to secure financing are making progress. Even so, with no apparent government support in the offing and private investors deterred by the investigation, the future looks bleak.
(Written by Tom Cropper, edited by Klaudia Fior)