GFG Alliance: Fraud investigation now looms

An investigation being undertaken by the Serious Fraud Office (SFO) of the government of the United Kingdom could shed light on to what extent metals producer the GFG Alliance has been affected by the former Greensill Capital, or to what extent the two firms worked in tandem to create financial irregularities.

According to online reports from The Guardian and other U.K.-based media, the announcement by the SFO that it was looking into GFG “immediately caused the collapse of a rescue deal for Liberty Steel and raised fears over thousands of British jobs.”

That potential rescue involving a San Francisco-based investment firm may not have proceeded all that far, as it was announced in late April with a timeframe involving several weeks of due diligence ahead. The Guardian quotes the San Francisco firm, White Oak Global Advisers, as stating, “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.”

On its website, the SFO says it 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.”

GFG Alliance, which includes steel and aluminum production facilities under the names Liberty Steel, Alvance and InfraBuild, said it would co-operate fully with the investigation, according to an online report from the BBC. The company’s many facilities, acquired by GFG and its Chair Sanjeev Gupta in the previous several years, include plants in the U.K., Australia, France and the United States.

The SFO describes itself as “a specialist, independent law enforcement agency set up by Parliament and overseen by the attorney general, forming part of the criminal justice system with jurisdiction in England, Wales and Northern Ireland. The agency’s mission is to tackle only the most complex and serious cases of fraud, bribery and corruption and money laundering.”

Adds the agency, “The SFO has teams of intelligence specialists, investigators, lawyers and forensic accountants all working with a single focus–to solve these high-profile, high-risk cases. When an investigation begins, we do not always immediately publicly declare it for operational reasons. It is the director who authorizes all investigations.”

The supply chain financing techniques carried out by Greensill Capital and GFG have received much of the attention in the financial press reporting on the collapse of Greensill and the doubts about GFG’s future.

Less remarked upon has been the end result of any questionable financing used and what happened to money that Greensill and GFG creditors are pursuing. An April 27 online article by BBC Business Editor Simon Jack, however, did include the comment that sources the broadcaster would not identify indicate “the creditors’ real concern is [that] no one seems to be able to locate £3 billion ($4.1 billion) that creditors allege Greensill advanced to Gupta and remains unpaid and unaccounted for.”

Employees of Liberty Steel, Alvance and InfraBuild, meanwhile, have concerns about which facilities will pull through the incident and remain productive and which ones may face a bleaker future.

In late April, Liberty Steel announced the formation of a Restructuring & Transformation Committee (RTC) to review those considerations, and earlier this month, GFG said it was likely to sell two steel plants in France.

When Liberty purchased the two French mills last year, GFG referred to the “national significance” they have for that nation’s rail infrastructure, so it’s possible the French government has encouraged the selloff by GFG.

In mid-March, a director of the Australian InfraBuild business unit referred to those steelmaking and scrap recycling assets as “Greensill-free.” As of mid-May, the InfraBuild logo and name is not listed in the “GFG Alliance Industry Brands” portion of the website. The GFG Alliance name is not mentioned on the home page of the InfraBuild website, although the “About Us” section indicates the firm is “a Liberty Steel Group brand, and part of the GFG Alliance.”