Serious Fraud Office launches probe into Sanjeev Gupta

The British steel industry was plunged deeper into crisis after the launch of a fraud investigation into Sanjeev Gupta’s GFG Alliance. 

The Serious Fraud Office (SFO) said it was scrutinising suspected ‘fraud, fraudulent trading and money laundering’ at companies in the GFG group. 

This, the SFO said, includes ‘its financing arrangements with Greensill Capital UK’. 

Under scrutiny: Sanjeev Gupta was hailed as the ‘saviour of UK steel’ after he snapped up a plant in Newport in 2013 and later went on a spending spree

The dramatic development puts 5,000 UK jobs on the line – including nearly 3,000 at Liberty Steel, which operates a dozen sites in Britain. 

Gupta was hailed as the ‘saviour of UK steel’ after he snapped up a plant in Newport in 2013 and later went on a spending spree that saw him take over factories in Rotherham, Scunthorpe, and Stocksbridge in South Yorkshire, among others. 

But his empire has been in crisis since its biggest lender Greensill Capital – run by Australian financier Lex Greensill and advised by David Cameron – collapsed at the start of March. Liberty Steel has been teetering on the brink since then and Gupta has been racing to secure alternative funding. The 49-year-old tycoon had been hoping to secure a £200m lifeline from San Francisco-based White Oak Global Advisors to prop up Liberty Steel’s UK operations. But White Oak said last night it had ended all talks. 

A spokesman said: ‘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.’ 

The SFO probe is likely to make it difficult for Gupta to strike deals with any potential backers. Ministers are understood to be ready to step in to save Liberty’s jobs and factories – but not any of Gupta’s companies. 

In March, Business Secretary Kwasi Kwarteng flatly rejected a request for a £170m bailout, saying he could not be sure whether it would stay in the UK because of GFG’s complex structure and opaque accounting. Preparations are being made in case Liberty needs to be put under the control of the Official Receiver – as happened when British Steel collapsed in 2019. 

But this could rack up a huge bill for taxpayers. It cost an estimated £1m a day for the Government to keep British Steel’s operations going while it sought a new buyer. 

The Government wants to save as many jobs as possible – and many are also in so-called ‘Red Wall’ areas, where the Conservatives have taken seats in traditional Labour heartlands. Of particular concern is Liberty’s Speciality Steel business, which has plants in South Yorkshire. The Speciality Steel business makes parts for the aerospace sector, including customers such as Rolls-Royce. 

But it has been hammered by a downturn brought on by the coronavirus pandemic. 

The GFG Alliance is not a single legal entity, but is a loose collection of businesses that are connected to Gupta and his family. It has sales of £15billion and around 35,000 employees worldwide, it says. Greensill’s collapse was connected to its close ties with Gupta – which it provided with a complex type of funding called supply-chain financing – which caused alarm among its insurers. 

Banks including Credit Suisse lost billions when Greensill went bust. 

Aside from steel, GFG works in a number of other industries such as manufacturing, renewable and aluminium. 

Gupta’s deal to buy Scotland’s only aluminium smelter made Gupta one of the UK’s biggest landowners because it included thousands of acres of land, including the foothills of Ben Nevis. 

A spokesman for the Community steel union said: ‘This is a concerning development and we await the findings of the investigation. However, this must not detract from the complete focus of all parties on securing our members’ jobs and protecting these crucial strategic businesses.’ 

Grant Thornton, which is handling the administration of Greensill Capital UK, declined to comment last night. 

But a spokesman for GFG said it ‘will cooperate fully with the investigation’ adding: ‘As these matters are the subject of an SFO investigation we cannot make any further comment.’ 

The spokesman added: ‘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.’

Accountants under fire

The Serious Fraud Office investigation into Sanjeev Gupta’s GFG Alliance will raise more questions about the accounting firm that signed off the books of dozens of the group’s companies. 

King & King audited around 60 of Gupta’s firms in the UK. The revenue generated by these groups – some of which are related to Liberty Steel – is estimated at around £2.5billion. 

The two-partner firm is led by Milan Patel, a 58-year-old chartered accountant, and is relatively unknown even in the UK accounting world. It is unusual for such a small firm to handle such a sprawling set of accounts. 

King & King has two small offices in London. Its audits were crucial to collapsed financing house Greensill lending money to GFG companies. 

King & King has few other big-name clients, but has handled accounting for a UK entity controlled by Bavaguthu Raghuram Shetty, the Indian founder of Middle East hospital operator NMC Health and finance group Finablr, which previously owned Travelex. NMC and Finablr have both been accused of fraud. 

The SFO has not said which GFG entities it is investigating. This means it is not clear if any were audited by King & King, which has not been accused of any wrongdoing. King & King was contacted for comment.

Agency in the spotlight

The investigation into Sanjeev Gupta throws the spotlight onto the Serious Fraud Office and its director Lisa Osofsky. 

The SFO has failed in recent years to land any notable blows and as a result has faced repeated calls to be disbanded or reformed. 

Last month the trial of two former executives at outsourcer Serco collapsed after the SFO failed to disclose evidence to the defendants in a blow to the agency. 

Allegations were that executives Simon Marshall and Nicholas Woods hid millions of profits made from a prison tag contract with the Ministry of Justice between 2011 and 2013. The probe lasted eight years but due to blunders the judge said the trial could not ‘safely and fairly proceed’. 

This week Marshall said the SFO did not have ‘anything to do with justice’ and should be shut down. In March 2020 three ex-Barclays bankers – Roger Jenkins, Richard Boath and Tom Kalaris – accused of fraud walked free from the Old Bailey amid further bungled evidence gathering. 

The year before that the agency dropped two high-profile probes into Rolls-Royce and Glaxosmithkline. 

The failures have put serious pressure on SFO director Osofsky, the former FBI lawyer who took over in 2018 amid a blaze of publicity. She promised to shake up the organisation, but instead conviction rates have fallen to record lows. 

Under her tenure Osofsky has frequently taken aim at UK law as the reason for the SFO’s many failures and complained about being underfunded and underpowered.

This post first appeared on Dailymail.co.uk