Turkish bidder for British Steel was accused of corruption

Oyak allegedly made land deals that cost Turkey’s exchequer tens of millions of lira

The Turkish pension fund poised to buy British Steel was accused of corruption by a parliamentary commission, and jointly owns a car plant where striking workers were allegedly mistreated.

A subsidiary of Oyak, a £15bn pension scheme chaired by an army general, is on the verge of being named the government’s preferred bidder to take over British Steel, including the Scunthorpe steelworks where more than 4,000 people work.

The Guardian asked Oyak, whose history goes back to the country’s 1960 military coup, about its involvement in a corruption scandal in 2012, when a Turkish parliamentary commission accused it of orchestrating land deals that cost the exchequer tens of millions of lira.

In a 130-page report, the commission cited several deals, including one in which Oyak allegedly obtained construction permits to build a military barracks on government-owned land but instead built much more lucrative private residential apartments.

The commission said that deals such as these had helped swell Oyak’s coffers during the late 1990s, at the expense of the Turkish treasury.

Oyak, which bid for British Steel via its Ataer Holding subsidiary – which is the largest shareholder in Turkish steel firm Erdermir – declined to comment.

But sources close to the company said it had installed a new management team in 2016, was subjected to annual independent audits and exhibited the highest standards of transparency.

A Turkish car plant that Oyak jointly owns with French car company Renault has also been the subject of frequent labour disputes, one of which resulted in Britain’s largest trade union Unite condemning the “criminalisation” of workers.

Oyak is a joint owner of the plant but is understood to have no involvement in labour relations at the site.

Steel industry sources told the Guardian the government had not done enough due diligence on the company, which is likely to enter exclusive talks with officials within days.

One source complained that business secretary Andrea Leadsom and steel minister Nadhim Zahawi have both been on holiday at a crucial juncture for the future of British Steel.

“There’s been a bit of a gap in interest between the previous business secretary [Greg Clark] and the new one,” said a separate source familiar with efforts to save British Steel.

Labour’s shadow steel minister, Gill Furniss, said: “The government must do everything it can to secure the future of British Steel to safeguard people’s jobs and their livelihoods, but it appears that ministers have gone missing.

“It is essential that whichever company is selected submits its plans for full and proper scrutiny by the steel unions, and that working conditions are agreed collectively so the firm is run for the benefit of the workers, not just shareholders.

“Labour will hold the government to account if there are any moves to undermine the unions and workers’ terms and conditions.”

The Department for Business, Energy and Industrial Strategy declined to comment on the ministers’ holidays although they are understood to have maintained contact with the government’s official receiver, an official who is handling the sale in conjunction with accounting firm EY.

Oyak is expected to be named the government’s preferred bidder as soon as this week, beating rival UK-based steel firm Liberty House, led by Indian-born businessman Sanjeev Gupta.

The Ankara-based firm is understood to have told the government that it sees Brexit as an opportunity and would invest £900m to double production at Scunthorpe to more than 4m tonnes of steel per year, bringing jobs to the Lincolnshire site.

But sources familiar with talks between bidders and the government said Liberty House was dismayed that a foreign owner would be favoured over a UK-based company with operations in Scotland, Wales, Yorkshire and Lincolnshire.

Liberty House is understood to have submitted a £70m bid similar to that proposed by Oyak.

It has also told the government that it would require a bridging loan, less than the £300m package of grants, indemnities and loans reportedly offered to the Turkish firm by government.

The Liberty plan involves converting one of Scunthorpe’s blast furnaces, which make steel from scrap, into less energy-intensive and polluting electric arc furnaces, which use recycled steel.

The proposal would lead to 400 more job losses than Oyak’s business plan initially but would leave the plant less open to the kind of external pressures that led British Steel to collapse into liquidation.

These include fluctuations in the price of iron ore and coking coal, which are required to make steel in blast furnaces but are not used in electric arc furnace production.