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Gautam Adani, others promised bribes worth ₹2,000 crore to Indian Officers: US govt indictment
The bribes allegedly promised by the defendants to secure contracts with Indian Electricity Distribution Companies (DISCOMS) for a project are detailed in the document filed by the US government against Adani Group Chairperson Gautam Adani and seven other individuals.
Adani and others have also been indicted under the Foreign Corrupt Practices Act (FCPA) and the Foreign Extortion Prevention Act (FEPA) on conspiracy charges to commit securities and wire fraud.
If the charges were proven during the trial, the defendants would be subject to heavy fines and possibly jail time.
This article explains how the accusations surfaced and what Adani and others may face in the future.
Claims of bribery
Adani’s 12-gigawatt solar power project is the subject of the primary bribery accusation. The indictment states that the Solar Energy Corporation of India (SECI) required state energy distribution firms (DISCOMs) to agree to buy the generated solar power through Power Supply Agreements (PSAs) to maintain financial sustainability. The project’s revenue potential and related Power Purchase arrangements (PPAs) would not be financially feasible without these arrangements.
To start the project, Gautam Adani, Sagar Adani, Vineet Jaain, Ranjit Gupta, and others allegedly devised a scheme to bribe Indian state government officials. The indictment claims that the purpose of this bribery was to convince officials to urge DISCOMs in different states to sign PSAs with SECI so that Adani and the US-based issuer could complete their PPAs.
The indictment claims that to guarantee the acquisition of seven gigawatts of solar power, bribes of ₹2,029 crore (about $265 million) were given to DISCOMS, with ₹1,750 crore (approximately $228 million) going to officials in Andhra Pradesh alone. According to the document, Sagar R. Adani kept thorough “bribe notes” on his phone, recording the states involved, the total sums offered, the distribution of bribes per megawatt of power, and the roles of the officials who received payments. Adani was accused of closely monitoring these bribes.
Furthermore, Gautam Adani personally visited with some high-ranking DISCOM officials, including those from Andhra Pradesh, several times in 2021 to ensure the plan’s success, according to the United States Securities and Exchange Commission (US SEC). Andhra Pradesh committed to the highest proportion of the PSAs after DISCOMs in Andhra Pradesh, Tamil Nadu, Odisha, Jammu & Kashmir, and Chhattisgarh consented to them.
Except for the Odisha firm, each DISCOMS is run by the state government.
This “bribery scheme” was allegedly executed in conjunction with a US issuer. The indictment claims that because Adani and its subsidiaries obtained more than $3 billion in loans and securities from US investors while hiding the plan’s existence, the bribery scheme was linked to financial fraud. The corporation is accused of misleading lenders and investors by misrepresenting its anti-bribery policies and compliance procedures.
The US government claims that the defendants conspired to destroy evidence and deceive investigators when its authorities started their investigations. Two schemes involved transferring project ownership and passing off bribes as development fees.
Additionally, defendants like Rupesh Agarwal, Saurabh Agarwal, Deepak Malhotra, Cyril Cabanes, and an unidentified “co-conspirator” required permission from the US issuer’s Board to transfer lucrative PPAs to an Indian energy business. It is alleged that they concealed bribes to secure other projects by inventing lawsuits and subpar project economics as justifications for returning the PPAs to SECI.
Issuance of Bonds
The indictment claims that Adani sold $750 million in senior secured notes due 2024 to US-qualified institutional buyers (QIBs) on September 8, 2021, under Rule 144A of the Securities Act.
Investors received an offering circular outlining the business, its initiatives, and its leadership. Additionally, “anti-bribery policies,” which were later shown to be untrue, were described. The bond’s profits were used for current projects, including the one in which allegations of bribery have been made.
Key executives Sagar Adani and Vineet Jaain are accused of approving false statements in the bond circular, such as guarantees of stringent anti-corruption measures supervised by a risk management committee they were a part of. International financial institutions are accused of facilitating the bond through a subscription agreement that contains misleading anti-bribery statements.
It has been claimed that officials purposefully misled compliance-related inquiries to secure the bond’s issue. Approximately 25% of the bond was bought by US investors. The indictment claims that important executives, including Vineet Jain, Sagar Adani, and Gautam Adani, were implicated in a Federal Bureau of Investigation (FBI) investigation into bribery and fraud claims.
According to the indictment, a subpoena delivered on Sagar Adani and electronic evidence verified that they were aware of the ongoing inquiry. Adani executives lied about any misconduct in public remarks, reports, and correspondence with financial institutions.
According to the US authorities, stakeholders, including US investors, unwittingly supported a fraudulent operation due to such false representations in annual reports, investor communications, and public announcements.
What is the next step?
The case will now go to trial because this is merely an indictment. The trial court and the jury will determine whether Gautam Adani and the other defendants are guilty of the FCPA offences.
The FCPA prohibits US corporations, their officers, directors, employees, and agents from bribing foreign government officials to secure or maintain business. This ban applies to all international business transactions regardless of the company’s location.
The scope of the FCPA is broad and encompasses many different people and organizations. This covers third-party agents, including consultants, distributors, joint venture partners, and other US company officials and employees.
Under the Act, individuals and corporations are subject to distinct civil and criminal sanctions. Individuals who commit crimes face up to five years in prison and a fine of $100,000 for each offence. Corporates may be fined up to $2 million for each infraction.
In addition to disgorgement of the alleged ill-gotten gains, civil fines can amount to millions.
The Adani Group has called these accusations “baseless” and said it will take whatever necessary action to guarantee a fair trial.
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