French authorities have opened an investigation into Sanjeev Gupta’s business empire, deepening the challenge to the UK metals magnate who was once lauded as “the savior of steel”.
The Paris public prosecutor’s office told the Financial Times it was investigating France’s Gupta operations over allegations of “misuse of corporate assets” and “money laundering”.
France is home to several significant assets in the GFG Alliance, a group of plants and smelters that raised Gupta during a multibillion-dollar buyout spree funded by Greensill Capital. Grencelle’s March collapse plunged GFG into a crisis and sparked investigations in Germany and the UK’s Serious Fraud Office.
Paris prosecutors said they launched their investigation in July after government officials reported suspicious activities. They refused to give details of the investigation.
GFG said it was “not aware of any such investigation and refutes any indication of wrongdoing in its French operations”.
The investigation by French prosecutors follows a report by an influential group of British MPs last week that raised questions about Gupta’s oversight of Liberty Steel, the UK’s third-largest steelmaker, after identifying “a series of audit and corporate governance red flags” at the GFG. .
The investigation represented a sharp contrast to the warm welcome Gupta had previously received from the French government. Bruno Le Maire, France’s economy minister, praised GFG’s deals in the country as “exemplary” for resettlement and decarbonization of industry.
Some of the allegations include Gupta’s attempts earlier this year to retain control of an aluminum smelter in Dunkirk, the largest in Europe and one of GFG’s most valuable assets, according to people familiar with the matter.
Public officials said Gupta struck a deal with commodity trader Glencore as it sought to fend off a takeover attempt by US private equity firm American Industrial Partners.
In addition to assuming 40 percent of the smelter’s major debt, Glencore will reap a financial interest from every ton of aluminum it sells, which could be up to $10 million for a commodity trader over the course of a year, People added.
One of the people briefed on the matter said that officials who reported the deal were concerned about whether it was designed for Gupta at the expense of the plant and thwarted the takeover attempt from AIP. The agency said last month that it had taken control of the smelter. GFG responded with legal action.
According to French law, misuse of company assets is when one or more directors use the goods or company credit “in bad faith”, either for personal gain or for the benefit of another company they own.
GFG said: “There was a commercial agreement with Glencore at market rates to secure stable financing for the business.” Glencore said it had “entered into a purely commercial arrangement with Dunkirk that was actively negotiated and was the subject of due diligence and review”.
Officials also reported that GFG used €25 million from the Dunkirk smelter to pay for litigation costs that stemmed from a dispute with Rio Tinto over the original purchase, according to people familiar with the matter.
The people added that using money from French companies to settle litigation costs was seen as an “abuse of company assets” that “benefited shareholders”.
Another case reported by officials concerns whether the entirety of the €18 million French government-backed loan given to Liberty Aluminum Poitou, part of the GFG empire, from a now-insolvent German bank branch in Grensell, had been published, the people said.
French media reported earlier this year that local prosecutors were investigating the Poitou loan, but the case has now been wrapped up in the broader investigation by the Paris prosecutor.
GFG said in a statement that it “complied with all the rules and invested 45 million euros of shareholder money in French refining and petrochemical assets, including Poitou, while it was under our ownership.”