UK Serious Fraud Office steps up GFG probe; group denies wrongdoing

The UK's Serious Fraud Office has stepped up an investigation into some of the UK companies in the steel, aluminum and energy grouping Gupta Family Group Alliance and its historic relationship with financier Greensill Capital, which collapsed in March 2021.

GFG Alliance said April 27 in an internal memo to employees that it will comply with the information request orders and will continue to cooperate fully in all manners.

"We are encouraged that the investigation is now progressing and is moving closer to a conclusion," GFG Alliance said in the note. "We have consistently rejected any wrongdoing on our part and pledged to cooperate fully to ensure they can conclude their investigations as quickly as possible."

The investigation started in May 2021 into suspected fraud, fraudulent trading and money laundering in relation to the financing and conduct of the business of companies within the GFG Alliance, including its financing arrangements with Greensill Capital UK Ltd, involving visits to sites across England, Scotland and Wales.

This has now been expanded into a so-called Section 2 procedure, by which SFO officers can arrive unannounced at premises to seek access to documents.

"On Wednesday 27 April, teams of SFO investigators across the UK issued notices under Section 2 of the Criminal Justice Act 1987 at addresses linked with Sanjeev Gupta's GFG Alliance, also known as the Liberty House Group of companies," the SFO announced on its website.

"The operation was coordinated from the SFO headquarters on Trafalgar Square. Teams attended trading addresses earlier this morning, issuing Section 2 notices to request documents including company balance sheets, annual reports and correspondence related to the SFO's investigation.

"Investigators spoke with executives at multiple addresses, who co-operated with the operation."

The SFO said it could not give further information at this stage.

The GFG Alliance memo to employees said the Section 2 requests had been "expected" and that the new "enquiries" do not impact the companies' operation.

" We have in place very strict information and document preservation policies which we implemented prior to the SFO announcement," the memo stated.

Restructuring

Efforts by some GFG European steel units to recover from the COVID-19-induced market downturn in 2020 were aggravated by Greensill Capital's 2021 collapse. Production was reduced or halted at some works, particularly as some raw materials suppliers were loathe to continue supplying to GFG works for fear they wouldn't be paid.

GFG Alliance has since reported progress on a restructuring and refinancing program initiated June 2021, allowing it to boost production at some steelworks in the UK, EU and US. However, its Liberty Liege plants in Belgium are now threatened with closure as their restructuring program was not approved by a local court.

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, of which some 11 million mt/year is in Europe. It also produces iron ore in Australia.

The businesses results have recently been favored by high steel product prices. S&P Global Commodity Insights Platts' North European domestic EXW Ruhr hot-rolled coil prices reached an all-time high of Eur1,460/mt ($1,541/mt) March 18, amid tight supplies . The product was assessed down Eur15 on-day April 27 at Eur1,290/mt ex-works Ruhr. It has gained +39.9% year to date.

The grouping's aluminum smelter in Scotland is understood to have continued to work well in recent times, also favored by high aluminum market prices. However, a lack of clarity surrounds the Aluminium Dunkerque smelter in France -- the EU's largest primary aluminum smelter -- which creditors claimed to have seized from GFG Alliance last year.