Why has Gautam Adani been indicted in the U.S. over alleged $250mn bribery scheme?

The story so far: Federal prosecutors in New York on Wednesday (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.

The defendants

The individuals named as defendants, alongside Gautam Adani and his nephew Sagar Adani, include Vneet Jaain, CEO of Adani Green Energy Ltd; Ranjit Gupta, who served as CEO of Azure Power Global Ltd from 2019 to 2022; Rupesh Agarwal, who was with Azure Power from 2022 to 2023; and Cyril Cabanes, an Australian-French dual citizen, along with Saurabh Agarwal and Deepak Malhotra — all of whom were affiliated with the Canadian institutional investor CDPQ.

Solar power plant project at the heart of the indictment

The indictment alleges that Gautam Adani and his associates paid over $250 million in bribes to Indian government officials between 2020 and 2024. These payments were reportedly made to secure contracts projected to generate $2 billion in profits over 20 years and to develop India’s largest solar power plant project.

The U.S. prosecutors have claimed that the seeds of the bribery scheme were sown between December 2019 and July 2020 when Adani Green Energy and another renewable energy company listed on the New York Stock Exchange secured contracts from the Solar Energy Corporation of India, a state-owned entity dedicated to promoting renewable energy adoption across the country. At the time, Adani Green Energy proclaimed in a press statement 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 —its high energy costs made it unaffordable for Indian States, leaving the Solar Energy Corporation of India grappling to attract customers to sign on.

Between 2021 and February 2022, several States including Odisha and Jammu and Kashmir agreed to participate in the solar power initiative. Around the same time, more individuals joined the bribery scheme, including former employees of CDPQ — Cyril Cabanes, Saurabh Agarwal and Deepak Malhotra.

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 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 fraud

Gautam Adani, Sagar Adani, and Vneet Jaain are accused of conspiring to deceive investors by issuing bonds supported by falsified and misleading financial data. According to the indictment, the scheme involved employing fraudulent tactics, such as withholding crucial information and fabricating corporate resolutions, to attract U.S. investors to their bond sales. The indictment outlines that Adani Green Energy Ltd. attempted to raise funds from U.S. and international investors in connection with a 2021 bond offering by making false and misleading claims regarding the company’s anti-corruption and anti-bribery measures.

Wire fraud

The defendants also face charges of conspiring to commit wire fraud by making false promises and fraudulent claims to secure loans and investments for their energy ventures. According to the indictment, Adani and his nephew lied to investors when their businesses took out a $1.35 billion loan and issued $750 million in bonds in 2021. Additionally, they are accused of withholding information from investors regarding ongoing U.S. 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. CDPQ, a shareholder in Adani companies, invests in infrastructure projects.

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 Securities and Exchange Commission (SEC) has filed a parallel civil lawsuit against Gautam Adani, Sagar Adani, executives of Adani Green Energy Ltd., and Cyril Cabanes. The SEC alleges that the bribes were paid to “secure [the Indian government’s] commitment to purchase energy at above-market rates that would benefit Adani Green and Azure Power,” two renewable energy companies in India. The SEC filed the complaints in the U.S. District Court for the Eastern District of New York.

What happens next?

The indictment calls for the forfeiture of assets acquired through criminal conduct, including proceeds from bribery, fraud, and obstruction schemes. The case will now proceed to trial, where Gautam Adani and the other defendants will present their defence.

The charges risk reigniting a reputational crisis for the Adani conglomerate, which had been previously accused of “brazen accounting fraud, stock manipulation and money laundering” by Hindenburg Research, a small investment firm in New York. Although the Adani Group denied those claims, its stock price plummeted following the release of the report.

On Thursday, 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 repay 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. In response to the indictment, an Adani Group spokesperson denied the allegations made by the U.S. Department of Justice and the SEC, branding them as “baseless.”