Troubles Mount on Adanis; US Market Regulator Summons Gautam Adani and Nephew for Fraud
By Suresh Unnithan
Thiruvananthapuram: Gautam S Adani, the Chairman and founder of the global conglomerate, Adani Enterprises Ltd has landed in deep distress. After the indictment of the New York District Court, the US market regulator has officially summoned the Adanis on alleged charges of manipulating investors presenting fraudulent assurances and also scheming to bribe officials of four states and a union territory in India relating to a solar energy deal. The bribe amount is reportedly huge, about $265 million. The case has been booked under Foreign Corrupt Practices Act. The Foreign Corrupt Practices Act of 1977 (FCPA) is a United States federal law that prohibits U.S. citizens and entities from bribing foreign government officials to benefit their business interests. Gautam Adani, his nephew Sagar Adani and seven other associates were charged with foreign bribery, securities fraud, securities fraud conspiracy and wire fraud conspiracy.
After the Federal Court unsealing its indictment and issuing arrest warrants against the accused, now the US Securities and Exchange Commission (SEC) has set the law in motion against Gautam Adani and his nephew Sagar Adani. SEC for its Complaint against Defendants Gautam Adani and Sagar Adani, alleges, “In 2021, two senior executives of Adani Green Energy Ltd. (“Adani Green”)— Gautam Adani, Adani Green’s founder and controlling shareholder, and Sagar Adani, Adani Green’s Executive Director (collectively, “Defendants”)—engaged in a bribery scheme involving the equivalent of hundreds of millions of dollars to obtain contracts that benefitted Adani Green, while, at the same time, falsely touting the company’s compliance with anti-bribery principles and laws in connection with a $750 million bond offering (the “Offering”).”
The SEC further alleges “Gautam Adani founded Adani Green and Defendants are part of a four-person management team that controls it. For years, Defendants positioned Adani Green to investors and the public as a leader among its peers and within India in principles of good corporate governance, highlighting Adani Green’s purportedly rigorous anti-bribery and anti-corruption principles and policies, and seeking to appeal to investors who valued governance factors.” According to SEC “In September 2021, Defendants leveraged that narrative in the Offering to sell $750 million of Adani Green corporate bonds (“Notes”), including more than $175 million inNotes to investors in the United States.”
“In connection with the Offering, Adani Green told purchasers of the Notes that none of Adani Green’s directors or officers, including Defendants themselves, had paid orpromised to pay bribes to government officials or attempted to unduly influence those officials.
Adani Green and Defendants also emphasized to underwriters and potential investors that Adani Green had implemented robust anti-bribery and anti-corruption processes and that Adani Green was a leader in India in good corporate governance.”
“ None of this was true. In the months and weeks before making these representations in connection with the Offering, Defendants were personally involved in paying or promising the equivalent of hundreds of millions of dollars in bribes to Indian state government officials to induce Indian state governments to enter into contracts necessary for Adani Green to develop India’s largest solar power plant project, from which Adani Green stood to earn billions of dollars.”
“ A second company involved in that power plant project, Azure Global Power Limited (“Azure”), agreed to pay a portion of those bribes and Defendants were also personally involved in collecting payment from Azure.” SEC said “Gautam Adani and Sagar Adani lied to purchasers of Adani Green’s Notes about Adani Green’s and their own involvement in a complex and high value bribery scheme. Those lies, made in connection with the offer and sale of Notes to investors in the United States, violated the antifraud provisions of the federal securities laws.”
The SEC in its submission to the Federal court said, “Gautam Adani and Sagar Adani each violated Section 17(a) of the Securities Act of 1933 (“Securities Act”) [15 U.S.C. § 77q(a)], Section 10(b) of the Securities Act of 1934 (“Exchange Act”) [15 U.S.C. § 78j(b)], and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5]. They each also aided and abetted Adani Green’s violations of Securities Act Section 17(a)(2), and Exchange Act Section 10(b), and Rule 10b-5(b) thereunder.”
The plaintiff,SEC, has pleaded the Court “Unless Defendants are restrained and enjoined, they will engage in the acts, practices, transactions, and courses of business set forth in this Complaint or in acts, practices, transactions, and courses of business of similar type and object.”
Interestingly, the Securities and Exchange Board of India (SEBI), headed by Madhabi Puri Buch who is facing controversy for allegedly owning business interests in Adani owned companies, has not yet taken cognizance of the allegations of the US Securities and Exchange Commission levelled against the Adanis. Since both SEBI and SEC are members of The International Organization of Securities Commissions (IOSCO), the India regulator is bound to take cognizance of the allegations levelled against an business group which comes under the regulatory horizon of SEBI.
The International Organization of Securities Commissions (IOSCO) is the international body that brings together the world’s securities regulators and is recognized as the global standard setter for the securities sector. SEBI is a member of the IOSCO Board, the governing and standard-setting body of the IOSCO and also a member of IOSCO Growth and Emerging Markets Committee (GEMC).
As per a statement of the U.S. Attorney’s Office the indictment was after a proper and detailed probe “conducted by the FBI New York’s Corporate, Securities and Commodities Fraud and International Corruption Units. The government’s case is being handled by the Business and Securities Fraud Section of the U.S. Attorney’s Office for the Eastern District of New York and the Criminal Division’s Fraud Section.”
The US market regulator, according to reports, has dispatched the summons on November 21 to the Adanis’ respective residences in Ahmedabad, with replies expected within 21 days. The summons was dispatched through the New York Eastern District Court.” A judgment by default will be entered against the Adanis if they don’t respond on time, the notice has said.
“Within 21 days after service of this summons on you (not counting the day you received it)…you must serve on the plaintiff (SEC) an answer to the attached complaint or a motion under Rule 12 of the Federal Rules of Civil Procedure,” said and added “If you fail to respond, judgment by default will be entered against you for the relief demanded in the complaint. You also must file your answer or motion with the court.”
According to legal pundits having knowledge on US laws say, “the SEC has the power to book, prosecute the accused. The regulator can recommend imprisonment or impose hefty penality or both on the guilty.”
