A steel trading firm collapsed owing creditors more than £315m after “robbing Peter to pay Paul”, a court has heard.
Balli Group plc and its subsidiary Balli Steel plc went “bust for all practical purposes” in 2012, but bosses told “increasingly egregious lies” to stave off the collapse, jurors at Southwark Crown Court were told.
The directors – brothers Vahid Alaghband, 70, and Nasser Alaghband, 61, and David Spriddell, 60 – along with senior employees Louise Worsell, 67, and Melis Erda, 56, were allegedly part of a scheme to induce trade finance banks to carry on lending money to keep the company going.
The court heard that chief executive Nasser Alaghband, of Greenway Gardens, Hampstead, had previously pleaded guilty to fraudulent trading, while the others are standing trial over an alleged cumulative loss of around 150m US dollars (£128m) to five banks in 2012 and 2013.
False documents are said to have been used to secure short-term loans which were meant to be repaid when Balli sold on steel.
But by June 2012 the firm was obtaining finance for “no steel deals”, where no goods were being bought, sold or shipped, jurors heard.
Prosecutor Jane Bewsey KC said: “Balli Steel was kept going by the obtaining of further trade finance.
“This trade finance was used to repay outstanding amounts on previous trade finance loans.
“In this way, the lack of profitable trade or latterly any trade at all was hidden from the trade finance banks.
“To put it colloquially, a time came when those involved in obtaining and extending trade finance at Balli Steel were effectively robbing Peter to pay Paul.”
The court heard that Balli Steel “acted as a middleman”, buying steel from suppliers in one country and selling it on to customers elsewhere.
The jury was shown a document from 2012 on which Norman Lamont, 80, who served as chancellor of the Exchequer from 1990 until 1993 before he was made a life peer in 1998, was listed as a non-executive director. He is not the subject of any charges.
Ms Bewsey said Balli Steel alone owed creditors more than £350m when the companies finally collapsed in spring 2013, when “the house of cards came tumbling down”.
“It is the prosecution case that, in the months before the companies collapsed, there had been widespread and systematic fraud and financial misconduct by the directors and senior employees of these two companies,” said Ms Bewsey.
“Trade finance banks, which loaned money to Balli Steel to fund individual purchases of steel, had been misled and documents had been falsified as part of an overarching scheme to induce those banks to continue lending to Balli Steel in order to keep the company going.
“The dishonesty deployed by these defendants escalated throughout the course of 2012 and into 2013.
“Increasingly egregious lies were told to the banks in order to obtain new or further trade finance and to delay repayment of outstanding trade finance advances to the banks in an attempt to stave off the collapse of Balli Group and its subsidiary Balli Steel.
Group chairman Vahid Alaghband, who lives in General-Guisen-Strasse 2, in Zug, Switzerland, denies two counts of fraudulent trading and one count of conspiracy to defraud.
Finance director Spriddell, of Felcourt, West Sussex, denies two counts of fraudulent trading.
Erda, 56, of Boltons Place, Chelsea, west London, denies fraudulent trading and six counts of conspiracy to defraud, while Worsell, 67, of Ocean Drive, Gillingham, Kent, denies fraudulent trading and five counts of conspiracy to defraud.
The trial continues, and is expected to last until January.
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