The US Securities and Exchange Commission (SEC) has summoned Gautam Adani and his nephew Sagar Adani, alleging their involvement in a US$265mn (million) bribery scheme. The case accuses the Adani executives of using bribes to secure contracts for the 'manufacturing linked projects,' pivotal to their renewable energy ventures, while misleading investors during a 2021 bond offering.
The defendants must respond to the SEC’s summons within 21 days, failing which a default judgment could be issued. The SEC trial will be jury-based, with the commission tasked with proving its allegations by a “preponderance of evidence”( It is the standard used in most civil cases to decide who is right. It means that one side has to prove that their version of the story is more likely true than not. So, if you imagine a balance scale, the side with the stronger evidence should tip the scale, even if it’s only a little bit. For example, if someone says a company did something wrong, they don't have to prove it 100%. They just need to show that, based on the evidence, it’s more likely that the company did the wrong thing than that they didn't. If the evidence is about 51% in favor of the claim, that’s enough for the case to win under 'preponderance of the evidence')." Potential outcomes include significant fines, injunctions, and leadership bans, further threatening the Adani Group’s operations and reputation.
The SEC complaint outlines a deliberate and systematic strategy led by Gautam and Sagar Adani to manipulate government agreements and mislead global investors. According to the SEC, the executives orchestrated bribes amounting to hundreds of millions of dollars to Indian state government officials. These payments secured power supply agreements (PSAs) under unfavorable terms for the states but guaranteed profits for Adani Green Energy Ltd and Azure Power Global Ltd. Specific claims include a US$200mn bribe to Andhra Pradesh officials, which reportedly facilitated a 7,000MW agreement and a bribe worth hundreds of thousands of dollars in Odisha for a 500MW power purchase agreement.
According to the SEC complaint Azure Power, another stakeholder in the projects, is accused of collaborating with Adani Green. The SEC alleges that Azure contributed to the bribes by transferring its rights to lucrative portions of the Andhra Pradesh projects to Adani Green. These transactions, the SEC claims, were structured to obscure the financial exchanges tied to the bribes.
In 2021, Adani Green raised US$750mn through bond offerings, with US$175mn sourced from US investors. The SEC claims that offering materials, signed by Gautam and Sagar Adani, misrepresented the company’s compliance with anti-bribery and anti-corruption policies. The bond documents highlighted Adani Green’s adherence to ESG (environmental, social, and governance) principles and anti-corruption standards, which were instrumental in attracting investments from ESG-focused stakeholders. However, the SEC alleges that during this period, the defendants were actively bribing officials, undermining the ethical narrative presented to investors.
The SEC cites extensive evidence supporting its claims. Internal records of Adani Green reportedly tracked payments and promises made to state officials, revealing the organized nature of the bribery scheme. Financial transfers between Adani Green and Azure Power are further highlighted as evidence of collusion to facilitate and conceal the payments.
The SEC’s complaint, filed in the US District Court for the Eastern District of New York, seeks several remedies. These include permanent injunctions to prevent Gautam and Sagar Adani from further violating US securities laws, civil penalties for their alleged misconduct, and director and officer bans prohibiting their involvement in publicly traded companies.
In parallel, the US Attorney’s Office for the Eastern District of New York has filed criminal charges against Gautam and Sagar Adani, Cyril Cabanes of Azure Power and others. These charges include securities and wire fraud and violations of the Foreign Corrupt Practices Act (FCPA).
The criminal case, which carries the potential for harsher penalties, alleges a systematic scheme involving falsified financial statements, bribery, and obstructing justice. The criminal case requires proof “beyond a reasonable doubt” (Proof beyond a reasonable doubt" is the highest standard of proof used in criminal cases. It means that the evidence must be so strong that there’s no reasonable doubt in anyone’s mind that the person committed the crime).
The initial SEC complaint accused the executives of offering to pay 'hundreds of millions of dollars in bribes' to Indian government officials to obtain energy purchase contracts at above-market rates. The legal actions include a five-count criminal indictment unsealed in federal court in Brooklyn, which alleges conspiracies to commit securities and wire fraud. The charges specifically target executives from Adani Green Energy Ltd. and Azure Power Global Ltd., suggesting a broader investigation into the renewable energy sector's procurement practices. The US authorities claim the scheme involved falsifying statements to attract approximately $750 million in investments, including around $175 million from U.S. investors, while simultaneously attempting to manipulate government contract negotiations through alleged corrupt practices. This led to a crash of Rs2.3 lakh crore in market capitalization of the group with some stocks frozen at their lower circuit on 21 November 2024.
The Adani group has vehemently denied the allegations made by the US department of justice and the Securities and Exchange Commission (SEC) against directors of Adani Green, terming them 'baseless'. In a media statement released on 21 November 2024, the Adani group categorically denied the bribery allegations levelled by the by the US Department of Justice and the Securities and Exchange Commission. The company's spokesperson emphasised the preliminary nature of the charges, highlighting the legal principle of presumption of innocence.
The spokesperson for the conglomerate emphasized that the charges are mere 'allegations,' and the defendants are 'presumed innocent unless and until proven guilty,' as stated by the US department of justice itself. The Adani group has pledged to pursue all available legal avenues to address these accusations.
"We are a law-abiding organisation, fully compliant with all laws," the statement emphasised, directly challenging the SEC and DOJ's allegations of a massive bribery scheme involving renewable energy project contracts. The Adani group's response signals its intention to vigorously defend against the charges and maintain its reputation in the global business community.
The Adani group has abruptly cancelled itsUS$600mn bond offering, citing ongoing legal challenges from US authorities. The decision came swiftly, with the group abandoning the bond sale just hours after its initial pricing. Adani Green Energy issued an official statement detailing the extraordinary circumstances surrounding the cancellation. The company explicitly referenced the criminal indictment by the US Department of Justice and the civil complaint from the US Securities and Exchange Commission, both filed in the Eastern District of New York.
"In light of these developments, our subsidiaries have presently decided not to proceed with the proposed USD denominated bond offerings," the statement explained, underscoring the impact of the ongoing legal investigations on the group's financial operations. This cancellation follows the earlier allegations of a massive bribery scheme and adds another layer of complexity to the Adani group's ongoing legal challenges. The decision to withdraw the bond offering reflects the potential financial and reputational risks posed by the US authorities' investigations.
On 23 November 2024, Adani Green Energy has denied the allegations and emphasized that the bribery charges pertain to a single contract representing roughly 10% of its business. The group’s CFO (chief finance officer), Jugeshinder Singh, stated that none of its public companies are implicated in the legal proceedings.
Adani Green Energy, already embroiled in allegations of bribery raised by the US SEC, is now facing accusations of intellectual property rights (IPR) violations in the United States. The US International Trade Commission (USITC) has initiated an investigation against two Adani firms—Adani Solar USA Inc. and Adani Green Energy Ltd.—for allegedly infringing Section 337 of the U.S. Tariff Act of 1930. This Section prohibits the importation and sale of goods that violate US intellectual property laws.
The complaint, filed by Trina Solar Co. Ltd. and its US manufacturing subsidiary, claims Adani entities imported and sold infringing solar cells, modules, and panels in the U.S., violating trade practices. If found guilty, the USITC could issue exclusion orders to block these products from entering the US market. This comes amid heightened scrutiny of Adani’s solar business operations, which have significantly expanded following the US tariffs on Chinese solar products in 2018. The latest investigation, coupled with the ongoing bribery charges, could derail Adani Green Energy’s ambitious plans to invest $10 billion in US energy and infrastructure projects.
We have covered the issue in detail through our previous article below:
