The future of hundreds of Highland jobs is in doubt after the launch of an investigation into suspected fraud and money laundering at the company hailed for saving Fort William’s aluminium smelter.
The Serious Fraud Office (SFO), which is carrying out the probe into GFG Alliance, said it would include the group’s multi-billion pound financing arrangements with collapsed lender Greensill Capital.
GFG Alliance, which is headed by entrepreneur Sanjeev Gupta and owns troubled Liberty Steel, said it will co-operate fully with the investigation and is “making progress with the refinancing of its operations.”
The Scottish Government said it was engaging with local management at the smelter and continuing to “monitor developments closely.”
Scottish Liberal Democrat leader, Willie Rennie, has demanded answers on how tax payers would be protected from the government’s exposure at the Lochaber smelter, which he said “runs to hundreds of millions of pounds.”
The Fort William facility, which has a workforce of around 200, was facing possible closure when GFG bought it, the surrounding 114,000-acre estate and a hydro-electric plant, for £330million from Rio Tinto in November 2016.
As part of the deal, brokered by Rural Economy Secretary Fergus Ewing, the Scottish Government guaranteed to buy power generated by the hydro scheme for the next 25 years. The previous year the Holyrood ministers had agreed to lend GFG £7m to buy the struggling Dalzell and Clydebridge steelworks from Tata.
In in a “reverse takeover” in 2017, GFG also acquired nearly 50% of shares in the Edinburgh-based renewable energy developer Atlantis Resources, which is now called Simec Atlantis Energy.
It has since emerged that GFG companies leaned heavily on financing from Greensill Capital before it collapsed in March. Greensill had £3.6 billion of exposure to the group.
Announcing its investigation, the SFO said: “The SFO is investigating suspected fraud, fraudulent trading and money laundering in relation to the financing and conduct of the business of companies within the Gupta Family Group Alliance (GFG), including its financing arrangements with Greensill Capital UK Ltd.
“As this is a live investigation, the SFO can provide no further comment.”
In response, a GFG spokesman said: “GFG Alliance notes the UK Serious Fraud Office‘s announcement that it has opened an investigation into GFG Alliance.
“GFG Alliance will co-operate fully with the investigation. As these matters are the subject of an SFO investigation we cannot make any further comment.
“GFG Alliance continues to serve its customers around the world and is making progress in the refinancing of its operations which are benefitting from the operational improvements it has made and the very strong steel, aluminium and iron ore markets.”
Mr Rennie called on the Scottish Government to “end the secrecy” around its dealings with GFG.
He said: “The Scottish Government’s exposure at the Lochaber smelter runs to hundreds of millions of pounds.
“We need a full explanation as to how they are protecting the taxpayer from this considerable potential loss. We also need to understand the extent of the due diligence undertaken by the government before they agreed to this considerable arrangement.
“Thousands of jobs were promised but next to none have been created. The government must end the secrecy.”
Shortly after buying the Fort William smelter, which is the last of its kind in the UK, GFG announced ambitious plans to develop a factory producing alloy car wheels and other automotive parts on the site, with the promise of 400 new jobs.
The proposed plant was granted planning permission by Highland Council in 2018. But, the following year GFG said it was rethinking the scheme and considering producing aluminium water bottles at the plant.
In November, fresh proposals for a £94m investment in new facilities and the creation of up to 70 new jobs at the smelter, which is part of GFG’s Alvance aluminium division, were announced. Plans for the development lodged with Highland Council included a new recycling and casting facility.
A Scottish Government spokesman said: “The Scottish Government’s priority is to support Scotland’s steel and aluminium sectors and the highly-skilled jobs they provide. A ministerial task force and officials have been active throughout the election period, engaging with local management at Liberty Steel and the Lochaber smelter, union representatives, GFG and the UK Government. We continue to monitor developments closely.
“Rural Economy Minister Fergus Ewing delivered a statement to Parliament immediately prior to the election recess and continues to keep members updated.”