Signals flash red for the SNP’s Gupta deals

Signals flash red for the SNP’s Gupta deals

by Max Young
article from Tuesday 23, March, 2021

WILL THE SNP’S DEALS with Sanjeev Gupta survive, or will all the jobs be lost? All warning lights are flashing red.  

A witness statement provided to the High Court in London by Lex Greensill, head of the bankrupt financier of the Gupta GFG conglomerate, has  confirmed Gupta’s looming insolvency, stating “I understand from GFG’s CEO, Mr Sanjeev Gupta, that GFG would almost certainly become insolvent if [Greensill] did not continue to provide financing for its future receivables,” adding that Gupta had confirmed this in a letter to BaFin, the German financial regulator. 

Gupta’s GFG has defaulted on payments to Greensill, has laid off staff and failed to pay tax due. The Spanish Government asked Gupta to provide proof of the solvency of his companies, but he couldn’t

Research by financial specialists Bloomberg into corporate information filed by Gupta shows that he has financed his deals by shuffling cash from one part of his business to another. Bloomberg states that “his ascent relied on clinching one deal after the next, raising new financing at every stage, and thus piling debt on top of debt – much of it from Greensill.” 

The collapsed lender Greensill Capital provided financing to Sanjeev Gupta’s business empire based on invoices from ostensibly independent companies with links to the steel magnate, known as “Friends of Sanjeev.” Many of these linked companies have their accounts audited by the same tiny accounting firm that audits Gupta’s companies. 

Bluestone Resources Inc, a company owned by the Governor of West Virginia Jim Justice, has filed a case against Greensill, accusing it of ‘continuous and profitable fraud’.  In the deposition Bluestone relates how Greensill introduced Bluestone to Gupta’s GFG company and was “emphatically encouraged… into a customer relationship with GFG”. 

As a consequence Bluestone made a coal shipment to GFG in June last year, granting Mr Gupta’s company an extended payment period to December. Bluestone was due to ship more in January this year, but withheld the shipment because GFG had not paid the December bill and the coal miner had “concerns regarding the credit risk of GFG”. “The Vice-Chairman of Greensill, Roland Hartley-Urquhart, at first vouched for GFG and urged [Bluestone] to continue to do business with GFG despite the late payment, but later agreed that if he were in Bluestone’s shoes he would not ship to GFG,” the filing said.

Unlike normal invoice-discounting, Greensill has been advancing money to clients, especially Gupta, on the basis of imaginary invoices, ones that might in the “future” be presented by “prospective buyers” including entities that were not and might not ever become customers.” Gupta accounted for over half of all Greensill's business.

It has also been revealed that amazingly the SNP was considering extending even more taxpayer support to Mr Gupta. Documents revealed by Freedom of Information requests show that Fergus Ewing, SNP Rural Economy Minister (currently under investigation for allegedly bullying civil servants and making improper farming payments), was discussing a second project with a “further government backstopped power purchase funding arrangement.” In the end this did not go ahead but the gullibility of the SNP is demonstrated by its consideration of more taxpayer support before Gupta had delivered on his first promises.

To date the SNP has failed to answer a whole range of questions, such as why, if Gupta owned both the hydro plant and the smelter, was it necessary for the SNP to guarantee the electricity price paid by the smelter, other than to allow him to sell half a billion pounds of bonds based on the guarantee and take the cash?

What has Gupta done with the money? Well last year, as just revealed by the Financial Times, he bought a £42m house in London’s exclusive Belgravia district. Decorators are currently at work on the property but when questioned revealed that Mr Gupta was out of the country. He is thought to be in Dubai where he owns a multi-million pound luxury villa. In 2019, flush with the proceeds of his bond sale based on the SNP Government Guarantee, he bought a £19.5m property in Sydney Australia. Gupta also owns the Wyelands Estate in Wales, which he bought for £3.1m and the 114,000 acre Jahama Highlands Estate at Fort William, making him the 5th largest landowner in the UK. He has also acquired a number of private aircraft and yachts. 

It would have been much preferable if Mr Gupta had kept to the promise he made to the SNP to build the £120 million plant to manufacture alloy wheels in Lochaber, rather than spending the money on expensive personal real estate and other luxury items. The SNP clearly has an unhealthy relationship with Gupta that even extended to allowing himspecial access to Edinburgh Castle to celebrate his acquisition of the two Scottish steel mills, a purchased financed by a £7m loan from the SNP Government that still hasn’t been paid back. 

Daniel Johnson, Labour’s finance spokesman, has called for Audit Scotland to step in to investigate the deals ministers struck. He said: “Elements of this deal are similar to previous interventions from the Scottish Government, where public funds have been used and there does not appear to be any return to taxpayers."  

Was the SNP just prepared to lash out millions of Scottish taxpayer’s money for a few photo-ops? Why has it been so naive and gullible? The future of these deals doesn’t look good. Moreover as the Times has commented Gupta’s arrangements are so complex it may be too difficult to disentangle them and rescue some of the parts. It surely is another fine mess that the SNP has created. 

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Max Young is an undergraduate student at Edinburgh University.   

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