FRC Launches Investigations into Audits of Four Liberty Steel Companies | Sanjeev Gupta

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The UK Accounting Authority has opened four investigations into audits of four companies owned by metals tycoon Sanjeev Gupta under the Liberty Steel banner.

The Financial Reporting Council said it had begun investigating legal audits of companies by consultancy firm King & King. The move follows an appeal by MPs asking the FRC to send the listeners back for investigation.

Liberty Steel has faced mounting problems since its main backer, Greensill Capital, collapsed in March 2021, triggering an ongoing bid to find new lenders.

Gupta controls Liberty Steel through GFG Alliance, an informal group of metals and energy companies that employs up to 35,000 people worldwide, including around 3,000 in British steel.

Its main UK assets are a series of steelworks under the Liberty Steel name, including large operations at Rotherham and Stocksbridge in South Yorkshire and smaller facilities in Wales and the Midlands, as well as a steel foundry. aluminum in Scotland.

A scathing report by a group of MPs on Gupta and his metals empire released last November flagged several areas of concern, including audits of Liberty Steel. They also called for Gupta to be investigated for potential breaches of his duties as a corporate director.

MEPs on the business select committee said they found ‘weaknesses in the audit’, adding that frequent changes of auditors and accounting deadlines were ‘red flags’.

The committee’s report concluded that the small audit firm King & King had “a lack of capacity to carry out audits”.

Milan Patel, a partner at King & King, previously told the committee that his organization was capable of auditing an organization the size of GFG and said the firm had “many clients who have hundreds of millions of pounds of turnover business”.

The new FRC investigation relates to the audits of the financial statements of the companies: Liberty Special Steels Limited, Alvance British Aluminum Limited (formerly known as Liberty Aluminum Lochaber Ltd) and Liberty Steel Newport Limited for the year to March 31 2019, as well as the audit of Liberty Performance Steels Limited for the year to March 31, 2020.

King & King has been approached for comment.

A GFG spokesperson said none of the alliance entities or individuals were the subject of the FRC’s investigation, adding: “We recognize the importance of strong auditing practices and have evolved our corporate structure and governance as we continue our efforts to restructure and refinance our portfolio.”

Concerns have been expressed for some time about GFG’s corporate governance. The UK government has rejected the firm’s request for a £170m bailout after the collapse of Greensill Capital, the supply chain finance firm which employed former Prime Minister David Cameron. It is understood ministers were concerned about his opaque corporate structure and the possibility of money moving overseas.

Transfers between different GFG companies have been carefully scrutinized. The Financial Times reported on Wednesday that a key firm at the heart of Gupta’s operations, Liberty Finance Management, received €84m (£71m) from GFG’s Liberty Ostrava steelworks on July 15, the day even where she was trying to repay an $81m (£65m) debt linked to a French aluminum smelter.

A GFG Alliance spokesperson said intercompany transfers were “always approved and recorded in accordance with local law and appropriate legal advice”, and would be “disclosed transparently in the annual accounts which are audited by the local company auditors”.

Last week, investigators from the Serious Fraud Office (SFO) requested documents and interviewed executives at the UK offices of companies owned by Gupta. The SFO is investigating “suspicion of fraud, fraudulent trading and money laundering” in relation to GFG and Greensill Capital. A GFG spokesperson declined to comment at the time.

It came after French prosecutors raided the Paris offices of GFG Alliance as part of an investigation into allegations of “misuse of corporate assets” and money laundering. Gupta’s company said after the searches: “We strongly reject any suggestion of wrongdoing and we will continue to cooperate fully with the French authorities to help them resolve this matter quickly.”

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