Federal prosecutors in New York on Thursday (November 21, 2024) indicted Adani Group Chairman Gautam S. Adani, his nephew Sagar Adani, and six others on multiple counts of fraud. The charges stem from an alleged multibillion-dollar scheme to bribe Indian officials in exchange for favourable terms on solar power contracts, which were projected to generate over $2 billion in profits.
“This indictment alleges schemes to pay over $250 million in bribes to Indian government officials, to lie to investors and banks to raise billions of dollars, and to obstruct justice,” a press release issued by the US Attorney’s Office, Eastern District of New York, said quoting U.S. Deputy Assistant Attorney General Lisa Miller.
Gautam Adani indicted in US bribery scheme LIVE Updates
The defendants
The defendants named in the case, alongside Gautam Adani and his nephew Sagar Adani (executive director of Adani Green Energy), include –Vneet Jaain, former CEO of Adani Green Energy; Ranjit Gupta, who served as CEO of Azure Power Global from 2019 to 2022; Rupesh Agarwal, who headed Azure Power Global from 2022 to 2023; Cyril Cabanes, former managing director of Caisse de dépôt et placement du Québec (CDPQ) which is also a majority stockholder of Azure Power; Saurabh Agarwal, former managing director of CDPQ India; and Deepak Malhotra, former executive of CDPQ.
Solar bid at the heart of the indictment
A novel tender floated by the state-owned Solar Energy Corporation of India (SECI) in 2019 forms the heart of the indictment that has accused the Adani Group Chairman and his associates of paying over $250 million in bribes to Indian government officials. The manufacturing-linked solar tender was eventually awarded to Adani Green Energy and Azure Power with the former claiming in a press statement at the time that it had won “the world’s largest solar award”.
According to the indictment, the $6 billion investment was projected to yield over $2 billion in post-tax profits over 20 years. However, the project encountered an unexpected setback — SECI was unable to sign power supply agreements (PSAs) with state electricity distribution companies (DISCOMs) due to the “high energy prices”. At this point, Adani Green executives allegedly bribed government officials in several states, including Odisha, Andhra Pradesh, Tamil Nadu, Chhattisgarh, and Jammu and Kashmir, to pressure their power distribution companies into agreeing to purchase solar power at above-market rates. The U.S. case is based on the premise that this is where the corruption took place, and that Adani Green failed to disclose this information to its investors in the U.S., constituting fraud under federal securities law.
The U.S. prosecutors have further alleged that Gautam Adani personally met with an unnamed “high-ranking government official of Andhra Pradesh” in August 2021 to expedite the execution of a PSA between SECI and the State’s DISCOMs, during which approximately ₹1,750 crore (85% of the alleged bribe) was purportedly offered to the official.
The charges
Violation of the Foreign Corrupt Practices Act
The indictment accuses Adani and his associates of conspiring to bribe Indian officials to secure energy contracts in a purported violation of the Foreign Corrupt Practices Act (FCPA). Although enacted in 1977, the law has been more stringently enforced in recent decades resulting in substantial fines for major companies, including Germany’s Siemens, Brazil’s state-owned Petrobras, and a subsidiary of Halliburton, the oil services giant.
President-elect Donald J. Trump reportedly wanted to strike down the legislation in his first term since he considered it “unfair” to American companies. Another prominent critic of the law, Jay Clayton, whom Trump appointed as U.S. Attorney for the Southern District of New York, contended in a 2011 paper that U.S. anti-bribery policies disproportionately burdened American companies in international transactions, thereby undermining U.S. competitiveness.
The prosecutors have alleged that the defendants meticulously tracked their bribes and offers to Indian officials using messaging apps, phones, and PowerPoint presentations, often employing “code names” in their communications. It was further claimed that two of the defendants even engaged in discussions to delete “incriminating electronic materials, including emails, electronic messages and a PowerPoint analysis.”
Securities and wire frauds
The federal prosecutors have also accused the defendants of committing securities fraud and wire fraud to finance the operations of Adani Green Energy and its subsidiaries by concealing FCPA violations to secure over $3 billion in bank loans from international financial institutions and U.S.-based asset management firms. “Gautam and Sagar Adani were engaged in the bribery scheme during a September 2021 note offering by Adani Green that raised $750 million, including approximately $175 million from U.S. investors. The Adani Green offering materials included statements about its anti-corruption and anti-bribery efforts that were materially false or misleading,” the indictment said.
Additionally, Adani and his associates have been accused of withholding information from US investors as well as Indian stock exchanges regarding ongoing federal investigations into their business practices in 2023 and 2024.
Obstruction of justice
Former employees of CDPQ — Cyril Cabanes, Saurabh Agarwal, and Deepak Malhotra — have been accused of obstructing an investigation into the bribery scheme by deleting emails and agreeing to provide false information to the U.S. government. In response to the indictment, CDPQ issued a statement saying, “CDPQ is aware of charges filed in the US against certain former employees. Those employees were all terminated in 2023 and CDPQ is co-operating with US authorities. In light of the pending cases, we have no further comment at this time.”
Civil lawsuit
The US Security and Exchange Commission (SEC) has filed a parallel civil lawsuit against Adani and his associates “for conduct arising out of a massive bribery scheme”. The complaint alleges that they engaged in a scheme that involved “paying or promising to pay the equivalent of hundreds of millions of dollars in bribes to Indian government officials to secure their commitment to purchase energy at above-market rates”. This was reportedly done while simultaneously raising $175 million from U.S. investors, based on “materially false and misleading” statements.
If proven, the charges could invite hefty financial penalties and a ban on the defendants from holding directorial or executive positions in companies that fall under US exchange regulations.
What happens next?
The U.S. prosecutors have sought the forfeiture of properties or proceeds derived directly or indirectly as a result of the offences. The case will now proceed to the “arraignment” stage where the concerned judge will formally communicate the charges to the defendants and decide whether to grant bail or not. The defendants will then be required to enter a plea — either guilty or not guilty. If they plead not guilty, the case will move forward to a jury trial. However, there is also a possibility of a deal being struck between the Indian tycoon and U.S. authorities following which the billionaire could seek a dismissal of the indictment.
As soon as news of the indictment broke on November 21, 2024, Adani Green Energy Ltd, the company at the heart of the allegations, cancelled a $600 million bond sale, the proceeds of which were intended to refinance a foreign-currency loan. Several Adani Group shares, including those of the flagship firm Adani Enterprises, also suffered massive losses and hit their lower circuits in early trade. An Adani Group spokesperson, however, dismissed the allegations as baseless, asserting that the conglomerate remains fully compliant with all applicable laws.
U.S. indictment: Adani’s legal storm explained
In a notable fallout, Kenyan President William Ruto has announced the cancellation of a procurement process expected to hand control of the country’s main airport to the Adani Group. A 30-year, $736-million public-private partnership deal the Kenyan energy ministry had signed with a unit of the Adani Group last month to construct power transmission lines has also been cancelled.
Published – November 21, 2024 02:17 pm IST
