The French government has reason to believe Sanjeev Gupta’s GFG Alliance ’embezzled’ funds from a steelworks in Romania, according to court documents in a case involving one of the steelworker’s companies.
Gupta has taken legal action in London in a last-ditch attempt to claw back a massive aluminum smelter in Dunkirk, northern France, after it was taken over by US private equity firm American Industrial Partners (AIP). ). GFG has been under intense financial pressure since the collapse of its main lender, Greensill Capital.
However, documents filed in the case suggest that French judicial authorities believe the laws may have been broken by Gupta’s companies in separate transactions in Romania. GFG is being investigated by the UK’s Serious Fraud Office (SFO) for “suspected fraud, fraudulent trading and money laundering”, and French prosecutors are also investigating, but GFG has not not yet been charged. GFG denied breaking any laws.
The foundry, the largest in Europe, is a highly sought-after asset in an industry important to the French government, and is thought to consume up to 1% of France’s electricity.
Gupta, an Indian-born, Cambridge-educated commodities trader, bought the smelter from Rio Tinto in December 2018. However, AIP took control of it in October 2021 after acquiring some of its debt, and the smelter has has since been the subject of a bitter legal dispute.
In a filing in response to GFG’s lawsuit, AIP wrote that its subsidiary, called Lightship, was unable to accept money offered in repayment of one of the GFG loans it held. after a warning from the French government on July 19.
The defense filing said: “Lightship was informed that there was reason to believe that the funds had been diverted from Liberty Galaţi (being a Romanian GFG Alliance steel mill), and could never have passed KYC. [know-your-customer] checks and AML [anti-money-laundering] meticulous examination. Lightship understood from this information that there were concerns about the legality of Liberty Galaţi’s transfer of funds.
GFG’s Romanian operations, including major steelworks in Galaţi, a port city on the Danube, have already come under scrutiny. Last year, a Czech government minister called for an investigation into the sale of carbon credits worth £40million from a Czech steelworks to Liberty Galaţi.
A GFG Alliance spokesperson said: “Carbon credits are assets of a business and, like other large industrial companies, Liberty Steel Group companies trade carbon credits in the normal course of business. This includes transactions of buying and selling credits according to their commercial needs and according to the market price.
Gupta also owns a small bank, Banca Română de Credite și Investiții (BRCI), based in Bucharest. GFG has previously denied that any of the funds offered to AIP have any connection to BRCI.
There were already “a number of areas of concern” prior to the French government’s intervention, AIP said in its filing, including the UK’s SFO investigation and “numerous public reports of alleged fraud, fraudulent trade and money laundering”.
AIP also pointed out that funds of $180m (£137m) had been pledged for debt repayment through Liberty Finance Management (LIG) Limited, another Gupta company not directly involved in the operations of the foundry. The company, whose 2020 accounts are nearly a year behind schedule, had just £33m of assets on its balance sheet in 2018 and £61m in 2019.
“This increased the risk that the funds came from tainted transactions by or within the GFG Alliance,” AIP alleged. “There were obvious concerns about the source of the funds.”
The French government’s alleged suggestion that GFG may have “embezzled” money from Romania could have serious implications for Gupta’s attempts to refinance its other businesses, including those in the UK. Under UK law, businesses cannot receive money if they believe it may have come from illegal behavior, and they must carry out strict checks on customers.
After a flurry of acquisitions that saw Gupta buy up tired assets ranging from huge mines in Australia to steel and aluminum plants in the UK, US and across Europe, the tycoon has came under intense pressure to find new funds after Greensill collapsed a year ago. there is Tuesday.
GFG said on Monday it had pumped an unspecified sum of money into Liberty Steel in the UK and persuaded HM Revenue and Customs to drop demands for the liquidation of four Liberty companies.
The filing alleged that AIP had repeatedly requested information from GFG about the source of the funds needed to repay its loan, but that GFG had only been able to provide “certain limited documents filed with Companies House and a copy of the passport of Mr. Gupta”. They “failed to say anything about the actual source of the funds,” the filing said.
GFG claimed that AIP bought the loans in order to ‘take over’ the smelter, and a source briefed on the negotiations claimed that GFG had received offers of more than $1 billion, five times more than the roughly $200 million dollars donated by AIP.
AIP in its filing claimed that GFG actually asked it to buy the debt to protect GFG from insolvency after it missed scheduled repayments.
A GFG Alliance spokesperson said: ‘Many claims in AIP’s filing are based on undisclosed documents and alleged conversations with third parties. There was no embezzlement of the group’s money from any company. We have taken legal advice and taken thorough steps to ensure compliance with all applicable laws and regulations, and are satisfied that the transfer of funds to reimburse AIP did not violate any of them.
The spokesperson said “AIP never intended to accept funds, from GFG or anyone else” to repay the loans. AIP used a “premeditated and predatory maneuver to grab a valuable asset on the cheap,” the spokesperson said. “AIP’s defense is as cynical as its initial expropriation of our assets. We reject AIP’s specious interpretation of events.
