Gautam Adani and India-US Relations

Indian billionaire Gautam Adani, who presides over a multinational business empire worth tens of billions of dollars, is now facing an arrest warrant from a New York court.

According to Reuters, prosecutors are planning to hand the arrest warrant to foreign law enforcement.

If executed, the warrant will leave an indelible black mark on Adani’s reputation as India’s top-most businessman.

More importantly, an arrest or even a warrant of arrest, could badly affect India’s relations with the US, which are critical for India’s defence against China and America’s bid to stop Chinese expansion in Asia.

The case is very important for America because Adani had used money from US investors to bribe officials of Indian State Electricity Companies to get lucrative contracts in the burgeoning solar energy sector. It was a gross violation of the US Foreign Corrupt Practices Act.

"Adani Green Energy tried to raise money from US and international investors with a 2021 bond offering on the basis of false and misleading statements about the firm’s anti-corruption and anti-bribery efforts," The New York Times reported.

The non-disclosure and bribing, that are serious charges, lie at the heart of the US federal probe and indictment.

NYT reported that the US Securities and Exchange Commission (SEC) "filed a parallel civil case saying that Adani Green Energy raised more than 175 million USD from US investors".

One of Adani’s associates was charged with conspiracy to violate the Foreign Corrupt Practices Act (FCPA). The FCPA, legislated in 1977 after a series of corporate scandals, makes it illegal to offer, pay, or promise anything of value to foreign officials to gain business advantage.

So, even though the bribery might have taken place in Indian States, American authorities started investigations because the case involved American entities, investors and American law governing them.

On Wednesday, a grand jury in New York indicted Gautam Adani and seven others on charges of bribing Indian officials to the tune of US$ 265 million to get US$ 2 billion worth of contracts in the booming Indian solar energy sector. The bribe money had been collected and paid by perpetrating a fraud on US investors, the court indictment said.

Lisa H Miller, Deputy Assistant Attorney General for the Justice Department’s Criminal Division, accused Adani of conspiring to obtain lucrative supply contracts “through corruption and fraud at the expense of US investors”.

A five-count criminal indictment charged Gautam S. Adani, Sagar R. Adani and Vneet S. Jaain, executives of Adani Green Energy (AGE) with conspiracies to commit substantive securities fraud. The accused played key roles in a multi-billion-dollar scheme to obtain funds from US investors and global financial institutions by giving false and misleading statements, the indictment said.

The indictment also charged Ranjit Gupta and Rupesh Agarwal, who are former executives of a renewable-energy company with securities that had traded on the New York Stock Exchange from 2016 to 2023.

Others charged were Cyril Cabanes, Saurabh Agarwal and Deepak Malhotra, former employees of a Canadian institutional investor.

The indictment alleged that Gautam S. Adani, Sagar R. Adani and Vneet S. Jaain lied about their “bribery scheme” to pay over US$ 250 million in bribes to Indian government officials. They lied to investors and banks to raise billions of dollars and to obstruct justice.

“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,” the filing said.

The US claims are:

• Between 2020 and 2024, the defendants agreed to pay more than US$ 250 million in bribes to Indian government officials to obtain lucrative solar energy supply contracts which were projected to generate more than US$ 2 billion in profits after tax over an approximately 20-year period.
• On several occasions, Gautam S. Adani personally met with an Indian government official to advance the “bribery scheme”. The defendants held in-person meetings with each other to discuss aspects of its execution, court filings said.
• The defendants frequently discussed their efforts in furtherance of the bribery scheme, including through an electronic messaging application. They extensively documented their corrupt efforts.
• Sagar R. Adani used his cellular phone to track specific details of the bribes offered and promised to government officials. Vneet S. Jaain used his cellular phone to photograph a document summarizing various bribe amounts the US partner owed the Indian Energy Company for its respective portion of the bribes.
• Rupesh Agarwal prepared and distributed to other defendants multiple analyses using PowerPoint and Excel that summarized various options for paying and concealing bribe payments and deleting incriminating messages.
• US authorities accessed documents showing conversations and other material records that show money raised from US investors was used to bribe government officials in India.

According to the court filings, following the promise of bribes to Indian government officials, between July 2021 and February 2022, Electricity distribution companies in Odisha, Jammu and Kashmir, Tamil Nadu, Chhattisgarh and Andhra Pradesh reported entered into Power Sale Agreements (PSAs) with the Solar Energy Corporation of India (SECI), an Indian government-owned enterprise.

Andhra Pradesh’s electricity distribution companies entered into a PSA with SECI on or about December 1, 2021, pursuant to which the state agreed to purchase approximately seven gigawatts of solar power- by far the largest amount of any Indian state or region.

The allegation is that a large chunk of the bribe was directed at officials in Andhra Pradesh.

The US prosecutors further further allege:

- Ranjit Gupta and Rupesh Agarwal, who were working for Azure Power (an Indian company which was listed in the New York Stock Exchange between 2016 and 2023) joined Adani’s bribery scheme, to convince state power distribution organizations to buy power from SECI.

- Azure Power and the Adanis concealed the bribery scheme from US banks and investors from whom they raised billions for the solar energy project.

- "Adani Green Energy tried to raise money from US and international investors with a 2021 bond offering on the basis of false and misleading statements about the firm’s anti-corruption and anti-bribery efforts," The New York Times reported.

The non-disclosure and bribing, serious charges, lie at the heart of the US federal probe and indictment.

NYT reports that the US Securities and Exchange Commission (SEC) "filed a parallel civil case saying that Adani Green Energy raised more than 175 million USD from US investors".

The report adds that one of Adani’s associates was charged with conspiracy to violate the Foreign Corrupt Practices Act (FCPA). That law makes bribing foreign officials a crime for companies operating in the US. The FCPA, established in 1977 after a series of corporate scandals, makes it illegal to offer, pay, or promise anything of value to foreign officials to gain business advantage.

Therefore, even though the allegations of bribery might have taken place in Indian states, American authorities started investigations because the case involved American entities and investors.

In Adani’s case, following the indictment, the trial will likely move to the “arraignment” stage. The judge will communicate the charges and decide whether to grant bail to the accused persons. The accused can decide whether to plead guilty or not guilty in response to the charges. If they plead not guilty, the case will proceed to a “jury” trial.

The Adani group has trashed the allegations as baseless and added that it will take all legal means to counter the charges. But the Congress party, which has been accusing Prime Minister Narendra Modi of being in cahoots with Adani for mutual benefit, has called for Adani’s immediate arrest.

While Modi and the government itself are silent, BJP leader Sambit Patra said that the law could take its course.

Experts say that the case will definitely harm the reputation of the Adani group in the Indian and international markets especially among foreign investors who will take a dim view of corporate governance in India.

Shares of Adani Group companies tanked up to 20% on the Bombay Stock Exchange in Thursday’s intra-day trade after Gautam Adani was charged by US prosecutors. Adani Green called off the issue of US dollar denominated bonds worth US$ 600 million.

If the case proceeds badly for Adani, it will further damage his position in India. But as Wilson Centre South Asia expert Michael Kugelman says, it will be difficult for Indian business and State institutions to disentangle themselves from Adani as he is heavily present in the infrastructure and energy sectors, which also happen to be Prime Minister Modi’s favoured sectors.

As for India-US relations, Kugelman points out that US President-elect Donald Trump and Indian Prime Minister Modi have a symbiotic relationship and some of Trump’s key appointees are pro-India, like Marco Rubio (Secretary of State), Michael Waltz (National Security Advisor) and Tulsi Gabbard (National Intelligence Chief). They are China hawks too.

And for any US administration, India is key to resisting China’s ambitions in South Asia and the Indo-Pacific. Pro-Modi elements in India say that the US Administration under Trump might cover up the damage caused by the Adani affair and get on with the job of maintaining cordial political, economic and defence ties with India keeping the looming threat from China in mind.

However, there are others who say that since US investors had been cheated and Trump has set up a special department to oversee business practices in America, with Elon Musk as its head, he would be obliged to let the law take its own course in Adani’s case, no matter how it affects India.