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 Rs 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.
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 Rs 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 (Rs 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.
Nairobi | Kenya's president said Thursday he has cancelled multimillion-dollar airport expansion and energy deals with Indian tycoon Gautam Adani after US bribery and fraud indictments against one of Asia's richest men.
President William Ruto in a state of the nation address said the decision was made “based on new information provided by our investigative agencies and partner nations.” He didn't specify the United States.
The Adani group had been in the process of signing an agreement that would modernize Kenya's main airport in the capital, Nairobi, with an additional runway and terminal constructed, in exchange for the group running the airport for 30 years.
The widely criticised deal had sparked anti-Adani protests in Kenya and a strike by airport workers, who said it would lead to degraded working conditions and job losses in some cases.
The Adani group had also been awarded a deal to construct power transmission lines in Kenya, East Africa's business hub.
Also Thursday, Energy Minister Opiyo Wandayi told a parliamentary committee there had been no bribery or corruption involved on Kenya's part in signing that deal.
US prosecutors indicted Adani this week on charges he duped investors in a massive solar energy project in India by concealing that it was facilitated by an alleged bribery scheme. He was charged with securities fraud and conspiracy to commit securities and wire fraud.
New Delhi | He was kidnapped by bandits in 1998 for ransom, and when terrorists attacked Mumbai almost 11 years later, he was among the hostages held at the seafront Taj Hotel. School dropout Gautam Adani's knack for surviving crises and his business acumen have propelled him to the ranks of India's richest, but he now faces possibly the biggest trial.
The 62-year founder of a sprawling ports-to-energy conglomerate is facing grave accusations of bribery and securities fraud in two separate cases brought by the US authorities.
He may be the first big Indian business leader to face such charges.
US prosecutors have charged him and seven others, including his nephew Sagar, of being part of a scheme to pay USD 265 million bribes to Indian officials in exchange for favourable terms of solar energy contracts that could potentially help his group earn USD 2 billion in profits.
Adani's listed firms saw USD 26 billion being wiped out on Thursday - the biggest single-day loss of market value (twice the size of what the group saw during the attack by US short-seller Hindenburg Research last year).
The charges, which his group has denied and called baseless, can potentially put his global ambitions on hold, starting with his travel. A threat of being questioned may mean he may choose not to travel to the US and a few other Western destinations.
More than his personal status, at stake, is the reputation of an empire the first-generation entrepreneur built over three and a half decades.
EARLY LIFE
Born in a Jain family in Ahmedabad, Gujarat. He was the seventh of eight children born to Shantilal Adani, a textile merchant, and Shanta Adani.
After dropping out of school, Adani moved to Mumbai at the age of 16 years, working for a while as a diamond sorter in the gem trade. He returned to Gujarat in 1981 to help his elder brother Mahasukhbhai run a small-scale PVC film factory the family had acquired in Ahmedabad.
In 1988, he set up a commodities trading venture under Adani Exports and listed it on the bourses in 1994. The firm is now called Adani Enterprises.
KIDNAPPED FOR RANSOM
By the mid-1990s, his business successes started attracting attention, including the unwelcome kind. On January 1, 1998, Adani and his associate Shantilal Patel were abducted at gunpoint after they left Karnavati Club in Ahmedabad in a car.
They were held allegedly by gangsters Fazlu Rehman and Bhogilal Darji alias Mama (who were later acquitted for lack of evidence) for a reported USD 1.5-2 million ransom. Both were let off a day later, but it is not known if the ransom was paid.
SURVIVING 2008 MUMBAI TERROR ATTACK
On November 26, 2008, he was dining at Mumbai's iconic Taj Hotel with Dubai Port CEO Mohammed Sharaf. As he was about to exit after paying bills, a few associates called for a second round of meetings over a cup of coffee. That's when terrorists attacked, which killed 160.
Adani, who along with other guests, was escorted first to the hotel kitchen and then to the basement by the staff, later said he would have been caught in the attack had he made it to the exit after paying bills for the dinner.
Adani spent the night in the basement and then in a hall before being rescued by commandos the next morning. After landing at the Ahmedabad airport in his private aircraft on November 27, Adani said, "I saw death at a distance of just 15 feet".
BUSINESS EMPIRE
Starting as a commodities trader in 1988, Adani started operating a port at Mundra on the Gujarat coast a decade later. He grew the business to become India's largest port operator.
There was no looking back after that. He rapidly expanded his business empire into power generation, mining, edible oil, gas distribution and renewable energy. This came alongside the meteoric rise of Narendra Modi as the chief minister of Gujarat. Adani's business interests expanded into airports, cement and more recently media.
Adani has repeatedly denied getting any favourable treatment from Modi when he was the chief minister or now as the Prime Minister.
He used Adani Enterprises as an incubator of new businesses before spinning them off into separate listed companies. The stocks of his seven listed companies surged -- some cases up to 1,500 per cent in the last three years amid aggressive expansion.
He overtook Mukesh Ambani of Reliance as India's richest and even briefly became the world's wealthiest person after Tesla CEO Elon Musk. He is now ranked 25th richest, with a net worth of about USD 57.6 billion, less than half of what it was in 2022.
In little over a decade, his group has become India's largest private sector power producer and will be the world's largest renewable company by 2030. It is the largest airport operator in India.
It is India's largest integrated energy player, spanning electricity generation, transmission and distribution, LNG and LPG terminals, city gas and piped gas distribution. His group has become the country's second-largest cement manufacturer and the highest-valued FMCG company following the IPO of Adani Wilmar.
It is diversifying rapidly into other sectors, including clean energy, hydrogen, aircraft maintenance, manufacturing, telecom, data centres and logistics.
In recent years, the USD 220 billion conglomerate has attracted foreign investors like Total Energies of France for its renewable energy, city gas and hydrogen projects.
CONTROVERSIES
In Australia, Adani group is still dealing with negative publicity for its Carmichael coal mine project in Queensland on concerns of carbon emissions and damage to the Great Barrier Reef. It won approval in 2019 after a decade-long struggle with regulators and environmentalists.
More recently, its USD 900-million container transhipment project at Vizhinjam port in Kerala faced protests from local fishermen on concerns of the coastal erosion undermining their livelihood. The four-month-long protests were called off last month.
REPUTATION CHALLENGE
Activist short seller Hindenburg Research, the firm which caught global attention with takedowns of electric-vehicle makers Nikola and Lordstown Motors, in a January 2023 report alleged that the Adani Group "engaged in a brazen stock manipulation and accounting fraud scheme over the course of decades".
Hindenburg called out the conglomerate's "substantial debt", which includes pledging shares for loans; that Adani's brother Vinod "manages a vast labyrinth of offshore shell entities" that move billions into group companies without required disclosure; and that its auditor "hardly seems capable of complex audit work".
Adani rejected all allegations and threatened to sue Hindenburg for its "reckless" attempt to sabotage the mega share sale at Adani Enterprises.
But this did not stop the free-fall at group stocks, which at the lowest point saw USD 150 billion in market value being eroded. The stocks recovered most of the losses as the group focused on business operations and got marquee investors like GQG to invest.
The latest charges may prove to be his biggest challenge. Like with all legal action, the Adanis must be presumed to be innocent until proven guilty, but until then the conglomerate may continue to be under the clot.
