French prosecutors investigate Sanjeev Gupta’s business empire – Financial Times

French authorities have opened an investigation into Sanjeev Gupta’s business empire, deepening the challenge facing the UK metals magnate once hailed as the “saviour of steel”.

The Paris Prosecutor’s Office told the Financial Times it was probing Gupta’s French operations over allegations of “misuse of corporate assets” and “money laundering”.

France is home to several important assets in the GFG Alliance, the collection of plants and smelters Gupta amassed during a multibillion-dollar acquisition spree financed by Greensill Capital. Greensill’s collapse in March plunged GFG into crisis and triggered investigations in Germany and by the UK’s Serious Fraud Office.

Paris prosecutors said they launched their probe in July after suspicious activities were reported by public officials. They declined to provide details of the investigation.

GFG said it was “not aware of any such investigation and refutes any suggestion of wrongdoing in its French operations”.

The investigation by French prosecutors comes after a report from an influential group of British MPs last week called into question Gupta’s stewardship of Liberty Steel, the UK’s third-largest steelmaker, after identifying “a series of audit and corporate governance red flags” at GFG.

The probe marks a sharp contrast to the warm welcome previously extended to Gupta by the French government. Bruno Le Maire, France’s economy minister, has praised GFG’s deals in the country as “exemplary” for reshoring and decarbonising industry.

Some of the allegations involve Gupta’s attempts earlier this year to retain control of an aluminium smelter in Dunkirk, the largest in Europe and one of GFG’s most prized assets, according to people briefed on the matter.

Public officials flagged a deal Gupta struck with commodities trader Glencore as he sought to fend off a takeover attempt by US private equity firm American Industrial Partners, the people said.

As well as assuming 40 per cent of the smelter’s senior debt, Glencore would reap a financial benefit from every tonne of aluminium it sold, which could amount to a $10m windfall for the commodities trader over the course of a year, the people added.

Officials who reported the agreement were concerned about whether it was designed to benefit Gupta at the expense of the plant and thwart AIP’s takeover bid, said one of the people briefed on the matter. AIP last month said it had seized control of the smelter. GFG has responded with legal action.

According to French law, misuse of corporate assets is when one or more directors make use of the goods or credit of a company in “bad faith”, either for personal gain or in the interests of another business they own.

GFG said: “There was a commercial agreement with Glencore at market rates to secure stable financing for the business.” Glencore said that it “entered into arm’s length commercial arrangements with Dunkirk which were actively negotiated and were the subject of due diligence and review”.

Officials also reported GFG’s use of €25m from the Dunkirk smelter to pay off litigation costs that stemmed from a dispute with Rio Tinto over the original purchase, according to people briefed on the matter.

The use of funds from the French business to settle the litigation costs was seen as a “misuse of corporate assets” that purely “benefited the shareholder”, the people added.

A further case reported by officials relates to whether all of an €18m French government-backed loan given to Liberty Aluminium Poitou, part of the GFG empire, from Greensill’s now-insolvent German banking subsidiary, was deployed at the plant, the people said.

French media reported earlier this year that the Poitou loan was being investigated by local prosecutors, but that case has now been wrapped into the wider probe by Paris prosecutors.

GFG said in a statement that it had “abided by all the rules and invested €45m of shareholder funds into French downstream assets, including Poitou, while under our ownership”.

source: French prosecutors investigate Sanjeev Gupta’s business empire – Financial Times

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