Saturday, June 19, 2021

UK’s financial crime unit probes suspected fraud in Sanjeev Gupta’s business ties to Greensill Capital

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Britain’s financial crime unit is investigating suspected fraud and money laundering involving the businesses of Sanjeev Gupta, whose global metals empire ballooned in recent years with the aid of billions of dollars in financing from the failed firm Greensill Capital.

The Serious Fraud Office said Friday that it was looking into potential fraud “in relation to the financing and conduct of the business of companies” within the Gupta Family Group Alliance, “including its financing arrangements with Greensill Capital UK.”

The announcement is the first indication that the British authorities may pursue criminal charges against Mr. Gupta, who runs the loose collection of businesses that bear the family name, and his ties to the finance firm founded by Lex Greensill.

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That company, which expanded quickly over the past decade, collapsed spectacularly in March, entangling SoftBank and Credit Suisse and igniting a political scandal in Britain.

The Gupta companies and Greensill Capital were closely intertwined, and Mr. Gupta and Mr. Greensill were entrepreneurs who got rich as their businesses expanded. Greensill built up its so-called supply chain finance business by lending money against the sales of Mr. Gupta’s companies.

Greensill then packaged the loans into securities to be sold to investors by Credit Suisse and other firms. Greensill’s collapse was partly caused by regulators’ and insurance companies’ concerns that it was overreliant on loans to the Gupta group.

Credit Suisse’s financial report shows it is facing a potential direct loss of as much as $90 million in the aftermath of the Greensill scandal. And Softbank’s Vision Fund, which invested $1.5 billion in Greensill Capital in 2019, has written down much of the value of its holdings in the firm since the collapse.

In video testimony on Tuesday before a parliamentary committee looking into the collapse of Greensill Capital, Mr. Greensill blamed the demise of his company on insurers’ canceling coverage of its loan business. He did say he regretted that his business was overly concentrated on one customer. He declined to identify the customer, but it is assumed to be the Gupta group.

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The scion of a business family, Mr. Gupta established a metals trading business in the 1990s while a student at Cambridge University. In 2015, he turned his attention to the production side, going on a buying spree of steel and other metal plants in Britain, and later in countries like Romania, France and the United States. Because some of these facilities were struggling, Mr. Gupta was hailed as a savior of the steel industry in Britain.

The loss of financing from Greensill has posed a serious threat to Mr. Gupta’s businesses, which employ around 35,000 people, including 5,000 in Britain. He has been trying to find new financing to save these businesses, but the disclosure of a high-level fraud investigation could complicate these efforts.

The British government has rejected a request for 170 million pounds (about $240 million) to support the Gupta businesses, citing their “opaque accounting,” according to another parliamentary committee that is investigating the businesses and the British steel industry.

A spokesman for the Gupta companies said that the group “will cooperate fully” with the Serious Fraud Office investigation and that the group was “making progress in the refinancing of its operations.”

A spokesman for Greensill declined to comment on the Serious Fraud Office announcement.

While Greensill and Gupta had interests across the world, some of the strongest repercussions of the Greensill collapse have been in Britain, where former Prime Minister David Cameron served as a senior adviser to the financial company.

Mr. Cameron has faced withering criticism for his lobbying of senior politicians and officials on behalf of Greensill, often using emails and WhatsApp messages to make appeals to the highest ministers, including Rishi Sunak, the chancellor of the Exchequer. Mr. Cameron has said he should have used more formal means of communication.

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At a video appearance on Thursday before the parliamentary committee investigating the Greensill collapse, Mr. Cameron appeared to show little contrition despite sharp criticism from lawmakers, one of whom characterized his dozens of approaches to government figures as “more like stalking than lobbying.”

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