Mint Explainer: What is the US indictment of Gautam Adani all about?

US prosecutors claim $250 million in bribes were paid to unnamed Indian officials in exchange for favorable terms on solar power contracts awarded to Adani Green Energy Ltd and Azure Power Global Ltd, another New Delhi-headquartered firm.

Later in the day, the Adani Group denied the allegations, calling them "baseless" and reaffirming its commitment to maintaining the highest standards of governance and compliance.

Mint breaks down the allegations, the people involved, and what this could mean for the Adani Group.

What is this bribery case?

The US Attorney's Office in New York indicted eight executives, including billionaire Gautam Adani, over an alleged multi-billion-dollar scheme involving $250 million in bribes. Prosecutors allege that between 2020 and 2024, Adani and seven other executives paid bribes to unnamed Indian government officials to secure solar energy supply contracts.

What are the charges?

US prosecutors have charged the executives, including Gautam Adani, with securities fraud and wire fraud. Separately, the US Securities and Exchange Commission (SEC) has accused the Adani Group of misconduct stemming from what it described as a “massive bribery scheme."

Who has been indicted?

Eight executives have been named, including three from the Adani Group, two former CEOs of Azure Power, and three former executives of Caisse de dépôt et placement du Québec (CDPQ), a Canadian pension fund managing $450 billion in assets.

Adani Group executives:

Gautam Adani: Chair of the Adani Group.

Sagar Adani: Nephew of Gautam Adani and head of Adani Green Energy.

Vneet S. Jaain: CEO of Adani Green Energy.

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Azure Power executives:

Ranjit Gupta: CEO from July 2019 to April 2022.

Rupesh Agarwal: CEO from August 2022 to July 2023.

CDPQ executives:

Cyril Cabanes: Former managing director of infrastructure for Asia-Pacific and the Middle East.

Saurabh Agarwal: Former managing director, CDPQ India.

Deepak Malhotra: Former director of infrastructure for South Asia.

Which companies are involved?

The companies implicated are Adani Green Energy Ltd and Azure Power.

Adani Green Energy is one of the 10 listed companies of the Adani Group. It went public in 2017 and has a market capitalization of nearly ₹2.24 trillion. Azure Power was founded in 2008 by Inderpreet Wadhwa, an Indian-American renewable energy entrepreneur. 

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In October 2016, Azure Power became the first homegrown energy company to be listed on the New York Stock Exchange. In November 2023, Azure Power delisted its shares, although they continue to trade on the over-the-counter (OTC) market.

Were Indian officials named?

The court documents do not name any Indian officials but reference the Solar Energy Corp. of India (SECI)

A government agency under the ministry of new and renewable energy, SECI facilitates developing and implementing solar energy projects in the country by issuing tenders. It also procures power from developers and sells it to state power distribution companies. 

SECI acts as the intermediary between project developers (Adani Green and Azure Power ) and state distribution companies (half a dozen state power distribution companies, including Tamil Nadu Generation and Distribution Corp. Ltd, Chhattisgarh State Power Distribution Co. Ltd, Jammu Kashmir Power Corp. Ltd and Andhra Pradesh Central Power Distribution Corp. Ltd)

Why are US prosecutors involved?

Over the last four years, Adani Green Energy raised over $2 billion from global investors, including those in the US. Prosecutors allege that the Adani Group concealed the bribery scheme from investors, despite ongoing investigations by multiple US agencies, including the Department of Justice and the Federal Bureau of Investigation (FBI).

How did the US prosecutors arrive at their conclusion?

One of the revelations made by the prosecutors is about a development in the summer of 2023. The prosecutors said that on or around 17 March 2023 FBI agents served Sagar Adani with a grand jury subpoena during a visit to the US and searched his office. The next day, Gautam Adani allegedly emailed himself "photographs of each page of the search warrant executed and grand jury subpoena served". 

"Despite knowing certain of the subject offenses and individuals under investigation by the United States government, the defendants Gautam S Adani and Sagar R Adani not only concealed the bribery scheme from financial institutions and investors in the United States and elsewhere but also caused others to make false and misleading statements regarding their awareness and knowledge of the United States government's investigation and its subjects," said the US prosecutors.

What happens next?

The Adani Group has denied the allegations, calling them "baseless" and emphasizing its commitment to maintaining the highest standards of governance, transparency, and regulatory compliance. The company reiterated that “the charges in the indictment are allegations, and the defendants are presumed innocent unless and until proven guilty." 

“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. We assure our stakeholders, partners and employees that we are a law-abiding organisation, fully compliant with all laws," the statement read.

It also emphasized that it would pursue all possible legal recourse to defend itself.

Despite the denial, the fallout is already evident in the markets. Adani Group stocks lost as much as 20% when trading began in Indian equity markets on Thursday, reflecting heightened investor concerns. 

According to media reports, the group also scrapped a $600 million bond offering on Thursday following the charges against Gautam Adani. Existing US-currency notes issued by the conglomerate plunged in Asian trading, signaling investor jitters.

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GQG Partners, a major investor in Adani Group companies, issued a statement saying it is monitoring the charges brought by the US Attorney’s Office and the SEC. “Our team is reviewing the emerging details and determining what, if any, actions for our portfolios are appropriate," the statement read. GQG also noted that more than 90% of its clients’ assets are invested in issuers unrelated to the Adani Group, emphasizing the diversified nature of its portfolio construction strategy.

Historically, such cases have often resulted in companies and individuals paying fines without admitting wrongdoing. However, this latest episode could reignite the reputational crisis for the Adani Group, which had previously managed to move past allegations of stock market manipulation and accounting fraud levelled by US short-seller Hindenburg Research in January last year.

The charges may also create fresh challenges for the group's foreign fundraising efforts, compounding the reputational damage caused by the Hindenburg allegations.