UK fraud probe into GFG Alliance throws more confusion over Whyalla rescue deal

A major fraud probe in the UK has thrown more doubts over hundreds of jobs at the Whyalla steelworks and sparked new calls for government to step in.

Hundreds of South Australian jobs hang in the balance as a major crime squad probes the UK operations of Whyalla Steelworks owner Sanjeev Gupta.

The UK Serious Fraud Office (SFO) has launched an investigation into suspected fraud and money laundering involving Mr Gupta’s business, GFG Alliance, and its failed financier, Greensill Capital.

The bombshell has triggered confusion over a $430m rescue deal for the steelworks and prompted new calls for state government intervention.

But the government has remained tight-lipped about any rescue plan should GFG and its Australian operations collapse.

The SFO, the UK’s complex financial crimes unit, announced on Friday night it was investigating “fraudulent trading and money laundering” relating to business financing and conduct within GFG, “including its financing arrangements with Greensill Capital UK Ltd”.

Premier Steven Marshall with GFG executive chairman Sanjeev Gupta in Whyalla in 2018. Picture: AAP Image/David Mariuz

Greensill, a major lender to Mr Gupta’s business, collapsed in March. GFG Alliance said in a statement it would fully co-operate with the SFO investigation. It would not comment on the role of the Australian operations with regards to the probe.

It was understood the investigation had been ongoing for several months and included looking at Greensill’s debt packaging of future invoicing of Mr Gupta’s companies, The Australian was reporting last night.

Investigators were looking into any imaginary companies, as well as companies which were invoiced but had denied doing business with companies associated with Mr Gupta or Greensill, the report said.

After news of the fraud investigation broke, US financier White Oak Global, which had agreed to provide $430m in emergency debt funding to the steelworks, announced it was “not in a position to continue discussions with any company that is under investigation by the Serious Fraud Office for money laundering”.

Once again, uncertainty surrounds the future of the Whyalla steelworks, seen here from Hummock Hill. Picture: Tom Huntley

But when asked by the Sunday Mail about the refinancing of Mr Gupta’s Australian arm, Liberty Primary Metals Australia, White Oak issued a another statement advising it would “continue efforts” to refinance the operations “subject to financial due diligence and acceptable governance”.

“Our consideration continues to be providing capital to good companies in critical industries while preserving jobs,” it said.

In response, GFG Alliance said it was making progress in refinancing its operations, which it said were benefiting from “operational improvements it has made and the very strong steel, aluminium and iron ore markets”.

The company announced on May 5 that it had struck a deal over the $430m owed by Liberty Primary Metals Australia, which operates the steelworks and mine.

But the latest confusion has prompted Whyalla residents to call on the state government to financially back the steelworks and mines – which employ 1800 people – should Mr Gupta’s investors fall through.

Eddie Hughes MP with his son Liam, a steelworker in Whyalla. Picture Simon Cross

State Labor MP for Giles, Eddie Hughes, called on the government to step in, if required.

“Assuming the worst does come to fruition with GFG, and there’s not a smooth transfer to another company, I believe the government should intervene to ensure the ongoing viability of the operation here in Australia,” Mr Hughes said.

“We should not lose sight of the fact that this is the only … steelworks in the nation that provides structural steel and rail, so it’s an important part of our sovereign manufacturing capacity.”

Whyalla councillor and local gym manager Joanne Marshall said the people of Whyalla needed to know there was a safety net for the future of the steelworks.

“The people and the businesses want surety. They want to make sure that they’re not being forsaken. They want to know the government is helping in any way they can,” she said.

“Everyone wants to know that there’s a safety net … that’s just human nature. You want to know that you’re not going to be left out to dry.”

Liam Hughes, a fitter and turner at the steelworks, said he would feel more secure in his job with government backing. “It would give a bit of reassurance,” he said.

Treasurer Rob Lucas said he had no further information regarding the UK investigation into GFG Alliance’s operations, but said the situation was being monitored by a government advisory group.

“The public can be assured, from the Premier and the government down, together with our senior advisers, we’re constantly monitoring the situation and we’ll respond if and when we have to,” he said.

He would not reveal details about any contingency plan should GFG Alliance’s refinance fail.

Mr Lucas has previously rejected a proposal from GFG to boost a proposed $50m taxpayer injection for the steelworks’ development.

“Both the federal and state government have the same view, that sovereign capacity in terms of the steel sector is important to the state and the nation,” he said.

“So, I think the people of Whyalla can rest assure that’s the overriding ambition from the federal government and the state government.”

The federal Liberal MP for Grey, Rowan Ramsey, said the uncertainty was unsettling for the town.

But he said he was confident another investor would take over the steelworks should Mr Gupta’s company fail.

“People should just stay calm. What we do have in Whyalla is a valuable asset. It’s making money, it sits on top of a long-term iron ore,” he said.

Sanjeev Gupta with employees at the Whyalla steelworks. Picture: Sean Kelly, GFG Alliance

A Whyalla Council spokesman said it would be inappropriate for the Mayor, Clare McLaughlin, to comment in light of the fraud investigation.

Mr Gupta, in an open letter published in the Sunday Mail last month, sought to reassure workers about the steelworks’ viability. He said he cared deeply about building on the manufacturing legacy of his “spiritual home”.

The British billionaire bought the Whyalla steelworks in 2017 following the $2.8bn collapse of previous operator Arrium.

Earlier this week, the UK Financial Conduct Authority announced it was investigating Greensill Capital and its packaging of loans, sold to investors through Credit Suisse.