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NEW YORK/NEW DELHI — Billionaire Gautam Adani has been charged by US prosecutors for allegedly being part of an elaborate scheme to pay USD 265 million (about INR 2,200 crore) bribe to Indian officials in exchange for favourable terms for solar power contracts.
The bombshell allegations, which Adani group denied saying it is innocent until proven guilty, may have a widespread fallout ranging from reputational risk to the conglomerate, inability to raise funds from the US market and the billionaire being forced to restrict his overseas travels to opening a political pandora's box that will give the Opposition another tool to target the government just as Parliament meets for the winter session, starting Monday.
Adani, India's second-richest man, and seven others, including his nephew Sagar, have been charged by the US Department of Justice with paying bribes to unidentified officials of state governments in Andhra Pradesh and Odisha to buy expensive solar power, potentially earning more than USD 2 billion in profit over 20 years.
Prosecutors said the US started an investigation in 2022. They alleged that the group raised USD 2 billion in loans and bonds, including from US firms, on the backs of false and misleading statements related to the firm's anti-bribery practices and policies as well as reports of the bribery probe.
According to the indictment, Adani Green Energy - the renewable energy arm of the group - in 2021 won a tender to supply 8 gigawatts of solar power to the government-owned Solar Energy Corporation of India. New Delhi-based Azure Power, whose officials too have been named along with former executives of Canadian public pension fund manager CDPQ in the case, won a similar 4 GW tender.
Also read: Rahul Gandhi seeks Adani’s immediate arrest, probe against SEBI chief
SECI was unsuccessful in finding buyers for the power at the prices contracted with Adani and Azure. Adani, in 2021 and 2022, met personally with government officials and offered them bribes to sign power sale agreements with SECI, according to the US Attorney's Office.
Following the promise of bribes, electricity distribution companies in Andhra Pradesh, Odisha, Tamil Nadu and Chhattisgarh entered into agreements with SECI.
The indictment alleges that INR 25 lakh per megawatt was paid to an official of the Andhra Pradesh state government, after which the state agreed to purchase 7,000 MW (7 GW) of solar power from SECI. Odisha purchased 500 MW of power through the same route.
While the Adani group denied all charges and termed them baseless, it scrapped a USD 600 million bond issue by Adani Green Energy Ltd.
The issue was oversubscribed three times hours before the indictment.
"In light of these developments, our subsidiaries have presently decided not to proceed with the proposed USD-denominated bond offerings," Adani Green Energy said in a stock exchange filing.
Stating that it is innocent unless and until proven guilty, a group spokesperson said, "The allegations made by the US Department of Justice and the US Securities and Exchange Commission against directors of Adani Green are baseless and denied". The group said it will take all possible legal recourse.
Adani group stocks tanked in the Mumbai trade. Ten listed firms of the group lost about USD 26 billion (INR 2.19 lakh crore) in market value -- more than double of what the conglomerate had lost when US short-seller Hindenburg brought out a damning report in January 2023.
Seizing on the allegations, the Leader of the Opposition in the Lok Sabha Rahul Gandhi demanded the arrest of Adani. Other opposition parties, including TMC, also attacked Adani over the allegations.
The issue is likely to figure in the winter session of Parliament.
The US case document has detailed accounts of how Sagar Adani allegedly used his mobile phone to track details of the bribes offered, while Adani Green Energy CEO Vneet Jaain used his phone to take a photograph of a document summarising Azure Power's share of the bribes paid, amounting to over USD 80 million.
In WhatsApp exchanges during the formulation of the bribery scheme, the accused were referred to by code name - Gautam Adani was referred to as 'SAG' or 'super aggregator', 'Numero uno' and 'The Big man' while Jaain was 'V', 'snake' and 'Numero uno minus one'.
"This indictment alleges schemes to pay over USD 250 million in bribes to Indian government officials, to lie to investors and banks to raise billions of dollars, and to obstruct justice," stated Deputy Assistant Attorney General Miller.
"These offences were allegedly committed by senior executives and directors to obtain and finance massive state energy supply contracts through corruption and fraud at the expense of US investors. The Criminal Division will continue to aggressively prosecute corrupt, deceptive, and obstructive conduct that violates US law, no matter where in the world it occurs."
Adani has been charged with bribery and securities fraud in two separate cases brought by US authorities -- a criminal indictment by the US Department of Justice in a New York court that charges him and seven others, including his nephew Sagar. Separately, the US Securities and Exchange Commission (SEC) has charged Gautam and Sagar Adani and an Azure Power executive with "violating the anti-fraud provisions of the federal securities laws".
The US law allows pursuing foreign corruption allegations if they involve certain links to American investors or markets.
Adani and his co-defendants sought to "obtain and finance massive state energy supply contracts through corruption and fraud at the expense of US investors", Miller said.
US Attorney Breon Peace said the defendants "orchestrated an elaborate scheme" and sought to "enrich themselves at the expense of the integrity of our financial markets".
In the indictment, prosecutors accuse the 62-year-old Adani and two Adani Green Energy Ltd executives -- executive director and his nephew Sagar R Adani and CEO Vneet S Jaain -- of conspiring to defraud investors.
The trio is accused of orchestrating the scheme with the help of the five other defendants, who face the Foreign Corrupt Practices Act (FCPA) and obstruction of justice charges.
The document says Gautam Adani personally met with a government official several times, and the defendants met in person to discuss the alleged scheme with each other multiple times. The scheme was extensively documented by the defendants, according to prosecutors.
As an example, Sagar Adani used his cellphone to track details of the bribes offered and promised to government officials, and Jaain used his phone to photograph a document summarising various bribe amounts owed.
Defendant Rupesh Agarwal also prepared analyses of the bribery scheme using PowerPoint and Excel that summarised various options for paying and concealing bribe payments, and he shared those analyses with other defendants, it is alleged.
The indictment charges Gautam and Sagar Adani as well as Jaain with multiple counts of conspiracy and securities fraud, and it charges Ranjit Gupta and Agarwal, who are former executives of another publicly traded renewable energy company, with FCPA violations. Agarwal and three former employees of a Canadian institutional investor — Cyril Cabanes, Saurabh Agarwal and Deepak Malhotra - have been accused of obstruction of justice and FCPA violations.
The indictment may throw the conglomerate again in turmoil just as it rebounded from US short-seller Hindenburg Reseach's damning fraud allegations.
Hindenburg's allegations of "brazen stock manipulation and accounting fraud" in January 2023 led to the conglomerate seeing a USD 150 billion wipeout in market value to its lowest point. The group stocks have since recovered most of the losses.
Adani Group had denied all allegations made by Hindenburg.
A school dropout, Gautam Adani founded his namesake group in 1988 as a commodities trading firm and built a business empire that now spans airports, shipping ports, power generation, energy transmission and mining companies.
"Specifically, on or about March 17, 2023, FBI special agents approached Sagar Adani in the United States and pursuant to a judicially authorised search warrant, took custody of electronic devices in his possession," the court document said.
Some conspirators, according to the documents, referred privately to Gautam Adani with the code names "Numero uno" and "the big man", while his nephew allegedly used his cellphone to track specifics about the bribes.
"On or about March 18, 2023, the defendant Gautam S Adani emailed himself photographs of each page of the search warrant executed and grand jury subpoena served on the defendant Sagar R Adani," it said.