Liberty Steel, part of Sanjeev Gupta's GFG Alliance, is under criminal investigation in Romania for alleged embezzlement and tax evasion, marking another significant blow to the embattled metals magnate.
Raids and Allegations
Romania's prosecutor's office confirmed last week that it had conducted raids on seven private homes and the registered office of an unnamed company. Although the company was not officially named, the details correspond directly with Liberty Steel's operations. A video released by authorities showed officers in helmets and body armour entering a property at night, with the footage blurred to hinder identification.
The prosecutors allege that individuals in management positions within the company acted to embezzle funds through affiliated entities registered in other countries. They point to a series of contracts for goods and services that were not based on real operations, as well as fictitious loan contracts.
The CO2 Certificates Scrutinised
A major transaction under scrutiny involves the sale of CO2 certificates worth €137 million to Russian state-owned gas giant Gazprom. These certificates are required by EU regulations for heavy polluters like steelworks. According to the prosecutors, the money from these sales was transferred to the accounts of the 'parent company' via a company based in Singapore.
It was noted that Gazprom was placed under UK and US sanctions related to Russia's invasion of Ukraine this year, which occurred well after the alleged transactions took place. The company was later forced to replace the certificates at a cost of €154 million, incurring a heavy financial loss. Prosecutors further allege that funds earmarked for industrial investments were diverted to cover payments to affiliated legal entities without any operational justification.
GFG Alliance's Firm Defence
In response to the allegations, a spokesperson for GFG Alliance issued a strong denial. Liberty Steel and its management will vigorously defend itself against the unfounded allegations directed at the company, the spokesperson stated. They contended that the Galati plant has been a net beneficiary within the group, receiving substantial financial support from the GFG Alliance.
The company asserts that all transactions under review were conducted for the benefit of the Galati site and were vetted and approved by independent external lawyers to ensure full compliance with applicable laws. GFG also stated that the plant's external auditors examined the transactions and issued clean audit reports for the relevant periods.
A Deepening Crisis for Sanjeev Gupta
This investigation compounds the severe difficulties facing Sanjeev Gupta. Once hailed as the saviour of steel for his plans to rescue struggling metalworks, his empire has been unravelling since the collapse of its main lender, Greensill Capital, in 2021.
The UK's Serious Fraud Office has been conducting its own investigation into GFG and Greensill since 2021. GFG and Gupta have strenuously denied any wrongdoing in that matter. Recently, Gupta has lost control of several key assets, including the steelworks in Whyalla, Australia, and the South Yorkshire operations of Liberty Steel UK in August.
The Romanian investigation is part of a broader series of raids by authorities in the country targeting various businesses. Liberty Steel's operation in Galati, located near the Ukrainian border, remains a focal point as the legal proceedings develop.
