The U.S. Department of Justice (DoJ) has issued a five-count criminal indictment of Gautam Adani, chairman of the Adani Group, and several of his business associates. The charges include promising more than $250 million in bribes to Indian government officials to secure solar energy contracts, conspiracies to commit securities and wire fraud, and orchestrating “a multi-billion dollar scheme” to defraud U.S. investors and global financial institutions by giving “false and misleading statements”. The indictment was unsealed by the U.S. Attorney’s Office for the Eastern District of New York late on November 20, 2024.
In a parallel move, the U.S. Securities and Exchange Commission (SEC) has also charged Gautam Adani and Sagar Adani (Gautam’s nephew and head of Adani Green Energy), along with Cyril Cabanes, a top executive of Azure Power Global Limited, (a New Delhi-headquartered renewable energy company that used to be listed on the New York Stock Exchange), with a massive bribery scheme involving Adani Green and Azure Power.
While the Department of Justice’s indictment constitutes a criminal case, the SEC’s is a civil complaint and if proved, could result in a “permanent injunction, a civil penalty, and an officer and director bar”. The SEC’s complaints were filed in the U.S. District Court for the Eastern District of New York.
Reacting to these developments, Adani Green Energy Limited has withdrawn its proposed $600 million U.S. dollar denominated bond offering. Shares of Adani Group companies lost about $28 billion in market value in morning trade on Thursday (November 21, 2024). This was the steepest drop in its share value since February 2023, when it was hit by allegations of misdemeanour and corporate malfeasance levelled by U.S.-based Hindenberg Research.
The Adani Group denied the allegations of the U.S. Department of Justice and the SEC, terming them “baseless”. In a statement, a spokesperson for the conglomerate said, “As stated by the U.S. Department of Justice itself, ‘the charges in the indictment are allegations and the defendants are presumed innocent unless and until proven guilty.’ All possible legal recourse will be sought. The Adani Group has always upheld and is steadfastly committed to maintaining the highest standards of governance, transparency and regulatory compliance across all jurisdictions of its operations.”
What does the indictment say?
The indictment concerns the actions of the defendants between 2020 and 2024. The defendants are Gautam Adani, Sagar Adani, Executive Director of Adani Green Energy, Vneet S. Jaain, former CEO of Adani Green Energy, Ranjit Gupta, former CEO of Azure Power Global, Cyril Cabanes, a former managing director at CDPQ, a Canadian pension fund which is also a majority stockholder of Azure Power, Saurabh Agarwal, former managing director of CDPQ India, Deepak Malhotra, former executive of CDPQ, and Rupesh Agarwal, former CEO of Azure Power.
U.S. indictment: Adani’s legal storm explained
Under the U.S.’s Foreign Corrupt Practices Act, 1977 (FCPA), it is unlawful to make payments to foreign government officials in a bid to obtain or retain business. It is also a criminal offence to raise money by misleading investors about key corporate governance practices, which this case concerns compliance with the FCPA. Further, it is unlawful to obstruct federal investigations by giving false information and destroying evidence such as electronic communications. It is also a separate offence to hide the authorisation of bribery practices in company annual reports. The defendants have been charged with offences on all these counts.
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The indictment also charges the defendants with obstructing a Federal Bureau of Investigation (FBI) probe by falsely denying their participation in the bribery scheme to FBI agents. Mr. Sagar Adani came to know of the FBI investigation, as well the people under the FBI scanner when, in March 2023, FBI agents in the U.S. served him a copy of a search warrant and took possession of his electronic devices.
The search warrant clearly “identified offences, individuals and entities under investigation” and mentioned the violations of the FCPA, securities fraud, wire fraud and related conspiracies involving Mr. Gautam Adani and Adani Green Energy. Mr. Gautam Adani even emailed himself photographs of each page of the search warrant executed and grand jury subpoena served on Sagar.
And yet, subsequently, Gautam and Sagar caused others to make false and misleading statements regarding their awareness and knowledge of the United States government’s investigation and its subjects, which enabled them to raise a dollar-denominated syndicate loan of $1.36 billon for Adani Green.
According to the indictment, starting in 2020, the defendants authorised and collaborated on a scheme to pay more than $250 million in bribes to Indian government officials in order to secure solar power purchase contracts for Adani Green Energy and Azure Power from the Solar Energy Corporation of India (SECI), a company of the Union Ministry of New and Renewable Energy whose mission is to increase the use of renewable-energy in India.
Unable to find buyers
The U.S. DoJ indictment has alleged that the Adanis resorted to a bribery scheme because SECI was unable to find buyers among State distribution companies (discoms) for the Adanis’ solar power, whose price was above market rates. But many State discoms did subsequently sign sale agreements with SECI to buy the Adanis’ more expensive renewable power.
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The indictment notes that “following the promise of bribes to Indian government officials — between July 2021 and February 2022 — electricity distribution companies for the States and regions of Odisha, Jammu and Kashmir, Tamil Nadu, Chhattisgarh and Andhra Pradesh entered into PSAs [Power Sale Agreements) with SECI”. Further, “Andhra Pradesh’s electricity distribution companies entered into a PSA with SECI on or about December 1, 2021” after which the State agreed to purchase approximately seven gigawatts of solar power, by far the largest amount of any Indian State or region.”
And then, to fund the operations of Adani Green Energy and its subsidiaries, the defendants committed securities fraud and wire fraud (any fraud that uses electronic communications through the U.S.) by hiding their FCPA violations to obtain bank loans worth more than $2 billion from international financial institutions and U.S.-based asset management companies. Also, by “offering more than $1 billion in securities” that were marketed and sold to investors in the U.S., Adani Green Energy and its directors “relied on the United States’ financial system to perpetrate this fraudulent scheme by….causing wires to be sent and received that passed through the United States.”
Published – November 21, 2024 05:05 pm IST