U.S. Prosecutors Charge Indian Industrial Magnate Gautam Adani With Fraud

The U.S. Department of Justice has accused Indian billionaire industrialist Gautam Adani of committing fraud and bribery in connection with his conglomerate's operations in the Indian solar sector. Adani also holds a dominant position in India's ports sector through subsidiary Adani Ports and Special Economic Zones (APSEZ), and his firm was previously accused of bribing port officials in 2011. 

The U.S. Attorney's Office for the Eastern District of New York (Brooklyn) revealed Wednesday that it has charged Gautam Adani, his nephew Sagar Adani and Adani Green Energy CEO Vneet S. Jaain with securities and wire fraud. The SEC has filed a separate complaint against Gautam and Sagar Adani in connection with a related bond offering. 

The indictment accuses Adani Green Energy of paying or offering to pay more than $250 million in bribes to government officials over the course of 2020-24. In return, Adani Green Energy obtained solar supply contracts expected to yield after-tax profits of about $2 billion over a 20-year period - eight times the amount of the alleged bribe payments. 

The centerpiece of the alleged scheme was an eight gigawatt, $6 billion solar megaproject in India, which Adani hailed at the time of signing as the "single largest solar development bid ever awarded." The award effectively doubled Adani Green Energy's portfolio overnight. Leveraging this success, the company went on to raise $175 million in financing from U.S. investors in a 2021 bond issuance, according to the SEC.

However, the solar power from this project was priced too high for India's state power distribution companies to buy, and it was not commercially competitive, according to the indictment. Instead, Adani Green Energy allegedly bribed state officials to influence the tendering process and convince state power distribution companies to sign power purchase agreements at above-market rates. 

The prosecutors said that they obtained extensive evidence of the scheme from the defendants' cellular devices, including electronic records of bribe amounts owed. One executive allegedly prepared and shared a PowerPoint presentation and an Excel spreadsheet detailing options for making and concealing bribe payments. 

While Adani Group's business has historically been a matter for the Indian court system, the Justice Department took issue with this alleged activity because Adani had raised money for its solar projects from U.S. investors.

"Adani and other defendants . . . defrauded [American] investors by raising capital on the basis of false statements about bribery and corruption, while still other defendants allegedly attempted to conceal the bribery conspiracy by obstructing the government’s investigation," said FBI Assistant Director in Charge James E. Dennehy. 

Adani's business empire was last accused of bribery in 2011, when a state judicial investigation concluded that Adani Enterprises had paid off a large section of Karnataka's state government to conceal the unlicensed export of 7.7 million tonnes of iron ore. In addition to the local political leaders and the state's pollution control board, the company allegedly paid off port and customs officials to avoid scrutiny. A file obtained by anti-corruption investigators at Adani's iron ore terminal at Belekeri allegedly contained illicit payroll information for a list of officials. The port director was owed $1,100 per sailing; a customs official required about $1,100 every three months, plus half a cent per tonne of cargo; and policemen got about $165 a month, according to the New York Times.

Today, Adani Group's port division - APSEZ - is the largest private ports group in India, and it continues to grow at home and abroad. Under APSEZ CEO Karan Adani, it has tried to put past controversies to rest, including a longrunning local debate over the ecological impact of flagship facility Mundra Port.

APSEZ's Karan Adani is one of four family members tipped as a possible successor to Gautam Adani at the helm of Adani Group. Sagar Adani, who was also charged in Wednesday's indictment, was another possible name on the list.