SNP-GUPTA FILES #2 : IS SCOTGOV A 'FRIEND OF SANJEEV' OR MERELY USEFUL IDIOTS?

Gupta auditors King & King resign claiming lack of evidence prevented full audits. Fears grow about Gupta collapse exposing Scottish taxpayers to hundreds of millions exposure amid ScotGov-Gupta deals

LAST WEEK I wrote a piece detailing the tremendous financial exposure for Scottish taxpayers resulting from deals facilitated by the Scottish Government. In that article I detailed the various deals facilitated by the SNP-led government in Holyrood, and laid out various ties existing between Gupta, Greensill and the SNP government.

However, the Financial Times has reported today that Sanjeev Gupta’s auditors King and King have claimed they were “blocked from stating there was insufficient information to complete its work”¹ The importance of this should not be overlooked amid fears Scottish taxpayers will face significant financial liabilities as a result of Gupta deals facilitated by the Scottish Government.

Dalzell steelworks and taxpayer exposure

Nicola Sturgeon at the reopening of Dalzell with Sanjeev Gupta in 2016

Back in April 28th 2016, Sanjeev Gupta acquired Clydebridge and Dalzell steel mills in Scotland. These deals were made possible as a result of Nicola Sturgeon’s government intervening to make them happen. The First Minister herself personally re-launched the Dalzell steel manufacturing site by September 28th of the same year.

That deal involved the Scottish Government purchasing the mothballed Tata Steel sites for £1, then immediately selling the steelworks to Mr Gupta’s company in a ‘back-to-back’ sale. The Holyrood Government has already admitted that this deal may have broken state aid rules². Put simply, this means taxpayers could be left footing a multi-million pound environmental clean-up bill.

As I have previously explained for context sakes, the Ravenscraig clean-up back in the day cost £70m. So, be under no illusions about the potential costs for taxpayers here. This unexpected liability resulting from a Scottish Government potentially breaking state aid law is far from insignificant.

The reason all of this enters a new magnitude of importance is that, the environmental clean-up liability for the steelworks would kick in if Gupta’s Liberty House were to collapse³. If reports in the Financial Times (FT) today are true - and there are no reasons to assume otherwise - then we are increasingly close to this eventually possibly materialising.

The FT reports

“Sanjeev Gupta’s longtime auditor King & King resigned from its role at his UK steelworks after it was blocked from stating there was insufficient information to complete its work.

The disagreement over the accounts is laid out in King & King’s resignation letters for four of Gupta’s main British steelworks that collectively employ thousands of workers across Yorkshire, the Midlands and Scotland.”⁴

The auditors, as I wrote in my previous article, are themselves under investigation by the accounting regulator⁵ under allegations their auditing work has not been up to scratch. But now the auditors have filed letters at Companies House, claiming that they were prevented from completing a full audit due to insufficient evidence from the Gupta businesses in question. The letters state that King and King were

“unable to complete” long overdue audits for the year ending March 31 2020. The letters, dated August 17 2022 and signed by King & King partner Milan Patel, cite “a lack of sufficient information and evidence” around several key areas.⁶

Furthermore, the FT reveals the auditors report in the letters that the insufficient evidence involves three critical areas. Firstly, relating to the Serious Fraud Office investigation into Gupta. Secondly, concerns raised about the Gupta companies abilities to even fund themselves for 12 months following approving their financial statements. And thirdly, for the “recoverability of related party balances”.

All of this matters because there are already public concerns about the ability of the Gupta family of firms GFG Alliance to finance themselves.

Just last year journalists at the FT were reporting about the “large amount of related party transactions” which companies under the GFG Alliance undertake with each other. It was reported that Liberty Commodities “borrowed heavily from Greensill Capital”, a financial backer for Gupta which has now collapsed.

Interestingly, all of that Liberty Commodities borrowing from the Greensill finance firm - advised by former UK prime minister David Cameron - apparently took place “on the basis of invoices, some of which appear to be dubious”⁷

All of that is surely bad enough, given these are the people whose deals in Scotland the SNP-led government chose to facilitate.

Naturally back in 2016 there was likely no way of knowing all of these emerging concerns. But we do know of meetings between Scottish Government cabinet ministers throughout 2017 which likely broke the ministerial code.

Also, that as late as October 2018 the SNP were happy to have Gupta “sponsor” a conference event, which included food and drinks. Furthermore, we also know that the financial liabilities for Scottish taxpayers relating to Gupta’s Liberty House Dalzell results from the Scottish Government acting in an illegal manner concerning state aid laws⁸.

None of this allows Ms Sturgeon to claim distance from the events relating to Gupta, Greensill, Liberty House and GFG Alliance today.

‘Friends of Sanjeev’

GFG Alliance chair Sanjeev Gupta with First Minister Nicola Sturgeon during a visit to the UK's last aluminium smelter in Fort William (Image: Warren Media)

Back in 2020, the companies in Gupta’s GFG Alliance were attracting scrutiny for the large amount of related party transactions conducted with each other.

The FT at the time revealed that “Gupta’s Wyelands Bank was under investigation for allegedly skirting around rules restricting related party lending. The bank’s auditor Mazars stated this year that Wyelands had faced “sustained challenges” in recovering loans from “fellow GFG Alliance firms”.

In short, the auditors for Gupta’s Wyelands Bank are saying that bank is finding it exceptionally hard to get the loans paid out to other Gupta businesses back. This comes as Gupta’s Wyelands Bank was itself also under investigation back in 2020 “for allegedly skirting around rules restricting related party lending”⁹

This is quite an incredible thing to be saying. Not least since the businesses the Gupta auditors King & King’s resignation letters relate to are Liberty Speciality Steels, Liberty Pressing Solutions, Liberty Steel Distribution and Liberty Steel Dalzell. And those auditors King and King are claiming they were unable to complete a full audit for four Gupta businesses they were responsible for auditing, including Dalzell (the one the SNP have exposed Scottish taxpayers to tens of millions of risk)

So, we can say quite clearly that as journalists were raising the red flag about the Gupta industrial empire, the SNP-led government was actively trying to downplay and conceal the true extent of taxpayer liabilities resulting from their deals involving Gupta.

We know, for example, the SNP government tried to avoid having to disclose the full extent of taxpayer liabilities as early as 2019. I wrote a piece about the two-year battle the FT had to fight to force Nicola Sturgeon’s government to confess the true extent of the taxpayer liabilities.

The SNP government was actively trying to downplay and conceal the extent of taxpayer liabilities resulting from their deals with Gupta during the time it was being reporting in the newspapers that concerns existed about the financial activities of the Gupta companies. This would suggest Ms Sturgeon’s government knew far more than their current silence would suggest. I find it incredible if, in the future, SNP ministers try to feign total ignorance and seek to distance themselves from this growing crisis.

Since Greensill Capital collapsed last year, the Gupta umbrella of companies (GFG Alliance) has failed to secure any new long-term financial backing; only further raising concerns about the possibility of Liberty House Dalzell going under leaving taxpayers footing the environmental clean-up bill.

Last year the FT published an article titled ‘Friends of Sanjeev’, which reported on a 2018 Gupta internal ledger revealing more than $1.5bn worth of transactions. That ledger drew the curtain back on “how the majority of Liberty Commodities’ outstanding receivables were from closely connected companies, including those owned by former or current employees, trusted business partners and friends.”¹⁰

We know that Greensill Capital frequently financed these exact sorts of trades, and when Greensill Capital collapsed it had racked-up an incredible $5bn of debt exposure to Gupta’s businesses.

It is normal practice for many large financial institutions to maintain internal policy procedures designed to block them from providing funding against invoices between “related parties”. Not least because those sorts of invoices are much more prone to misrepresentation and malpractice. Yet Greensill Capital, it seems, was one on a list of of ‘friends of Sanjeev’. One wonders if Gupta auditors King and King are also to be included on this list? Time, and the twin investigations by the accounting regulators and the Serious Fraud Office may well tell.

Looking ahead

Scottish taxpayer exposure and liabilities resulting from SNP-Gupta deal making could run into the hundreds of millions.

Scottish voters might just begin to ponder a few questions…were the SNP ‘friends of Sanjeev’? Or just utterly incompetent? Perhaps this Scottish Government are to Sanjeev Gupta what naïve western fellow-travellers were to Vladimir Lenin…useful idiots?

Judging by the fact the SNP government has spent £160,813 of taxpayers money on lawyers relating to the Dalzell Steelworks…I guess they are worried Scottish voters might just start asking. Just who did Nicola Sturgeon and the SNP jump into the proverbial bed with…time will tell.

1. Robert Smith, Sylvia Pfeifer and Michael O’Dwyer (2022) ‘Sanjeev Gupta’s auditor quit after lack of evidence to complete work’, Financial Times, https://www.ft.com/content/62f29c35-70b4-4a86-8178-bdff0af91934

2. Scottish Parliament (2021, 15 December) ‘Meeting of the Parliament (Hybrid): Dalzell Historical Industrial Transaction’,https://www.parliament.scot/chamber-and-committees/official-report/what-was-said-in-parliament/meeting-of-parliament-15-12-2021?meeting=13475&iob=122323#orscontributions_M5612E437P773C2365806

3. Tom Gordon (2021), Taxpayers could face huge clean up cost for SNP steel deal lasting moments, The Herald, https://www.heraldscotland.com/politics/19786812.taxpayers-face-huge-clean-cost-snp-steel-deal-lasting-moments/

4. Robert Smith, Sylvia Pfeifer and Michael O’Dwyer (2022) ‘Sanjeev Gupta’s auditor quit after lack of evidence to complete work’, Financial Times, https://www.ft.com/content/62f29c35-70b4-4a86-8178-bdff0af91934

5. Jasper Jolly (2022), ‘Auditor resigns from Sanjeev Gupta’s UK steel companies’, The Guardian, https://www.theguardian.com/business/2022/sep/15/sanjeev-gupta-uk-steel-companies-auditor-king-and-king-resigns

6. Robert Smith, Sylvia Pfeifer and Michael O’Dwyer (2022) ‘Sanjeev Gupta’s auditor quit after lack of evidence to complete work’, Financial Times, https://www.ft.com/content/62f29c35-70b4-4a86-8178-bdff0af91934

7. Robert Smith, Cynthia O’Murchu and Michael Pooler, (2021), ‘Invoices to ‘Friends of Sanjeev’ underpinned Greensill loans’, Financial Times, https://archive.ph/SaToF#selection-1491.0-1491.60

8. Scottish Parliament (2021, 15 December) ‘Meeting of the Parliament (Hybrid): Dalzell Historical Industrial Transaction’, https://www.parliament.scot/chamber-and-committees/official-report/what-was-said-in-parliament/meeting-of-parliament-15-12-2021?meeting=13475&iob=122323#orscontributions_M5612E437P773C2365806

9. Robert Smith, Sylvia Pfeifer and Michael O’Dwyer (2022) ‘Sanjeev Gupta’s auditor quit after lack of evidence to complete work’, Financial Times, https://www.ft.com/content/62f29c35-70b4-4a86-8178-bdff0af91934

10. Robert Smith, Cynthia O’Murchu and Michael Pooler, (2021), ‘Invoices to ‘Friends of Sanjeev’ underpinned Greensill loans’, Financial Times, https://archive.ph/SaToF#selection-1491.0-1491.60