Nearly 22 months after the Adani group faced a barrage of charges and allegations of manipulation and accounting fraud scheme from US-based short-seller Hindenburg Research, the Indian business conglomerate headed by Gautam Adani is now rocked by allegations of major bribery charges to sign power contracts in a US court.
The fresh allegations filed in the US District court, Brooklyn, are far more serious as there are documents involving conversations and other material records that show money raised from US investors was allegedly used to bribe government officials in India. The Hindenberg case was largely restricted to charges raised by the US-based shortseller about alleged stock-manupulation, related party transactions and charges of stock manupulation.
In a 106-page report released on January 25, 2023, Hindenburg accused Gautam Adani’s Adani group of “brazen stock manipulation and accounting fraud scheme over the course of decades”. The report was published ahead of the Rs 20,000-crore follow-on public offer (FPO) of Adani Enterprises Ltd, the flagship entity of the conglomerate. Shares of Adani companies tanked, and the group subsequently called off the FPO, which was fully subscribed.
The US shortseller alleged it identified numerous undisclosed related party transactions by both listed and private companies, seemingly an open and repeated violation of Indian disclosure laws. In one instance, a Vinod Adani-controlled Mauritius entity, with no signs of substantive operations, lent Rs 1,171 crore ($253 million at that time) to a private Adani entity which did not disclose it as being a related party loan.
The private entity subsequently lent funds to listed entities, including Rs 984 crore ($138 million at more recent substantially lower exchange rates) to Adani Enterprises. Another Vinod Adani-controlled UAE entity called Emerging Market Investment DMCC lent U.S. $1 billion to an Adani Power subsidiary, the US firm alleged.
It alleged that Adani´s key seven listed companies have a total of 578 subsidiaries, some of which are incorporated in notoriously opaque jurisdictions, including in Mauritius, Panama and the UAE, according to the annual reports of the conglomerate. The key seven listed entities collectively engaged in a staggering total of 6,025 separate related-party transactions in fiscal year 2022 alone, per BSE disclosures, it alleged.
Gautam Adani’s elder brother Vinod Adani and offshore entities he controls have played a central role in Adani Group company scandals, including a Rs 680 crore (U.S. $151 million) diamond trading scandal and a Rs 3,974 crore ($800 million at the time) power generation over-invoicing scandal, Hindenburg alleged.
The government investigations into those scandals alleged that Vinod Adani’s offshore entities were involved in sham transactions and inappropriately received payments from listed companies of the Adani Group for which there was little or zero public disclosure at the time. “Our research, which included downloading and cataloguing the full Mauritius corporate registry database, evidences how Vinod Adani, along with other close associates, have set up dozens of entities in Mauritius that have little to no genuine corporate presence,” it alleged.
Mauritius-based entities like APMS Investment Fund, Cresta Fund, LTS Investment Fund, Elara India Opportunities Fund, and Opal Investments collectively and almost exclusively hold shares in Adani-listed companies, totalling almost U.S. $8 billion, the US firm alleged. Given that these entities are key public shareholders in Adani, what is the original source of funds for their investments in Adani companies?, the US firm asked.
The US firm said, “Entities associated with Monterosa Investment Holdings collectively own at least U.S. $4.5 billion in concentrated holdings of Adani Stock. Monterosa’s CEO served as director in 3 companies alongside fugitive diamond merchant Jatin Mehta, whose son is married to Vinod Adani’s daughter. What is the full extent of the relationship between Monterosa, its funds, and the Adani family?”
The US alleged that listed Adani companies paid Rs 6,300 crore to private contractor PMC Projects over the past 12 years to help construct major projects. A 2014 DRI investigation called PMC Projects a “dummy firm” for Adani Group. Newly revealed ownership records show that PMC Projects is owned by the son of Chang Chung-Ling, the close associate of Vinod Adani. Taiwanese media reports that the son is “Adani Group’s Taiwan representative”, it alleged.
In its report on Adani, Hindenburg alleged a group of five supposedly independent investment funds have an incredibly suspicious pattern of holdings. All five entities were formed out of Mauritius by the same incorporator, based out of the same address, and with multiple overlapping nominee directors: APMS Investment Fund, Albula Investment Fund, Cresta Fund Ltd, LTS Investment Fund Ltd and Lotus Global Investment Fund, it alleged.
“Adani family members allegedly cooperated to create offshore shell entities in tax-haven jurisdictions like Mauritius, the UAE, and Caribbean Islands, generating forged import/export documentation in an apparent effort to generate fake or illegitimate turnover and to siphon money from the listed companies,” it alleged.
A federal court in Brooklyn, the US, witnessed a five-count criminal indictment, charging Gautam S. Adani, Sagar R. Adani and Vneet S. Jaain, executives of Adani Green Energy, with conspiracies to commit securities and wire fraud and substantive securities fraud for their roles in a multi-billion-dollar scheme to obtain funds from US investors and global financial institutions on the basis of false and misleading statements.
The indictment also charges Ranjit Gupta and Rupesh Agarwal, former executives of a renewable-energy company with securities that had traded on the New York Stock Exchange (the US Issuer), and Cyril Cabanes, Saurabh Agarwal and Deepak Malhotra, former employees of a Canadian institutional investor, with conspiracy to violate the Foreign Corrupt Practices Act in connection with a bribery scheme also perpetrated by Gautam S. Adani, Sagar R. Adani and Vneet S. Jaain, involving one of the world’s largest solar energy projects.
As alleged, the defendants orchestrated an elaborate scheme to bribe Indian government officials to secure power project contracts worth billions of dollars and Gautam S. Adani, Sagar R. Adani and Vneet S. Jaain lied about the bribery scheme as they sought to raise capital from US and international investors. This indictment alleges schemes to pay over $250 million in bribes to Indian government officials, to lie to investors and banks to raise billions of dollars, and to obstruct justice.
“These offenses 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 U.S. investors. The Criminal Division will continue to aggressively prosecute corrupt, deceptive, and obstructive conduct that violates U.S. law, no matter where in the world it occurs,” the filings said.
“Gautam S. Adani and seven other business executives allegedly bribed the Indian government to finance lucrative contracts designed to benefit their businesses. Adani and other defendants also defrauded 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,” stated FBI Assistant Director in Charge Dennehy. “The FBI maintains its steadfast mission to expose all corrupt agreements, especially with international governments, and protect investors from related harm.”
As alleged in the indictment, between approximately 2020 and 2024, the defendants agreed to pay more than $250 million in bribes to Indian government officials to obtain lucrative solar energy supply contracts with the Indian government, which were projected to generate more than $2 billion in profits after tax over an approximately 20-year period (the Bribery Scheme).
On several occasions, Gautam S. Adani personally met with an Indian government official to advance the Bribery Scheme, and 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, it said.
The defendants also extensively documented their corrupt efforts: for example, 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 U.S. Issuer owed the Indian Energy Company for its respective portion of the bribes; and Rupesh Agarwal prepared and distributed to other defendants multiple analyses using PowerPoint and Excel that summarized various options for paying and concealing bribe payments, the filings said.
According to the court filings, following the promise of bribes to Indian government officials, in or about and between July 2021 and February 2022, electricity distribution companies for the states and regions of Odisha, Jammu and Kashmir, Tamil Nadu, Chhattisgarh and Andhra Pradesh entered into power sale agreements (PSAs) with Solar Energy Corporation of India (SECI) under the Manufacturing Linked Project.
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 court filings said.