The US Department of Justice’s (DOJ) criminal charges against Adani Group chairman Gautam Adani pose the biggest threat yet to the Asian tycoon’s US$169 billion empire. More importantly, it is also a missed opportunity for India’s opposition, an unexpected gift to US president-elect Donald Trump, and an all-around embarrassment for Indian Prime Minister Narendra Modi.
The 54-page indictment alleges that Adani Green Energy Ltd’s 2020 order from Solar Energy Corporation of India Ltd had a problem — there were no takers for the expensive power, which jeopardized the lucrative contract.
That gave rise to a corrupt scheme “to pay over US$250 million in bribes to Indian government officials, to lie to investors and banks to raise billions of dollars, and to obstruct justice,” the DOJ said. The case is against Gautam Adani, his nephew Sagar Adani, who is executive director of the green energy business, and six other individuals.
The conglomerate denied the allegations as baseless and said it is fully compliant with all laws.
“All possible legal recourse will be sought,” the group said in a statement.
The news about the court filing came hours after the end of assembly elections in the western state of Maharashtra, home to India’s financial capital Mumbai. Opposition leader Rahul Gandhi had made crony capitalism — especially Gautam Adani’s proximity to Modi — the central piece of his campaign, particularly in the Maharashtra poll. That is what makes the timing of these charges unfortunate for him.
Adani, who owns the two Mumbai airports and supplies electricity to the city, would soon start redeveloping its biggest shantytown. Gandhi and his allies have alleged that the terms of the controversial US$3 billion project were sweetened for Adani by the state government, which is controlled by Modi’s party. Neither Adani nor Modi has responded to the allegations. A change in the local administration might lead to a fresh tender.
The outcome of the Maharashtra vote is already sealed. Votes were counted on Saturday. Exit polls suggested that Gandhi’s challenge to dislodge the government probably failed in a close contest, but the ruling Mahayuti alliance achieved a landslide victory.
However, for Trump the indictment could not have come at a better time. His incoming administration would bargain with India for greater market access, especially for US tech firms, from a position of strength. The Adani Group is yet to comment on the charges, although an early settlement would allow the sprawling conglomerate to continue to access its most-important raw material: debt financing.
Adani’s stocks and bonds are already tumbling. For bankers to take an Adani loan file to the risk committee, the overhang of criminal charges against Adani and his nephew, who is part of an elaborate succession plan, must first go away.
That is also what Modi would want. The indictment is the biggest blowback against him yet from the ever-expanding corporate governance saga that has engulfed the infrastructure behemoth. Adani is the prime minister’s longtime friend, and neither Modi’s government nor the ruling party shied away when New York-based Hindenburg Research accused Asia’s second-richest man of “pulling the largest con in corporate history” in January last year.
That turned out to be a manageable crisis. The group strenuously denied the short seller’s allegations of stock manipulation and accounting fraud, and the storm appeared to blow over. The conglomerate’s market value doubled from the low it hit in February last year, following a US$150 billion-plus selloff.
By comparison, the DOJ’s charges are grave. The indictment alleges that Indian state governments were not too keen to buy 12 gigawatts — eight from Adani and four from US-listed Azure Power Global Ltd — of what they perceived to be expensive power.
Gautam Adani, Sagar Adani and then-Azure chief executive Ranjit Gupta, among others, “devised a scheme to offer, authorize, make and promise to make bribe payments” to government officials in India so they would be persuaded to purchase the electricity, the court filing said.
The two groups worked out their respective shares of the bribes, the DOJ said. Gautam Adani and his officers allegedly “relied on the US financial system to perpetuate this fraudulent scheme.”
They did this by seeking and securing investors and potential investors physically located in the US, and causing wires to be sent and received that passed through New York, the indictment said.
The echoes of the case would reverberate through India. So far it is mostly Gandhi pounding the tables. For regional opposition leaders, Adani’s link with Modi has not exactly been a hot button issue.
That was also the case when, in a report in August, Hindenburg alleged that Securities and Exchange Board of India (SEBI) head Madhabi Puri Buch had a potential conflict of interest, raising doubts about the objectivity of SEBI’s ongoing probe into Adani. Buch and the regulator denied the accusations, and the SEBI chief skipped a scheduled appearance before a lawmakers’ committee last month.
However, the US charges change everything. The indictment alleges that Adani has concealed the “bribery scheme” from investors and financial investors since at least March last year, when Federal Bureau of Investigation agents served Sagar Adani with a search warrant in the US.
While concepts such as conflicts of interest — or alleged breaches of securities law — require a modicum of financial training, bribery is something every politician understands.
Almost US$228 million was offered to just one person, identified in the court filing as Foreign Official No. 1 from the southern state of Andhra Pradesh, the DOJ said. There is plenty here for a full-blown domestic scandal. If this affair drags out, Modi’s own Bharatiya Janata Party might wonder how long it should support a prime minister who at 74 is unlikely to lead it to the 2029 election.
In other words, Gandhi’s intuition to stick to the alleged Modi-Adani nexus as a talking point in election campaigns might have been vindicated. In a press conference on Thursday last week, the Congress Party leader called for Buch’s removal and Gautam Adani’s arrest. While the DOJ indictment came too late to sway the vote in Maharashtra, it might yet cast a long shadow — on India’s national politics and relations with Washington next year.
Andy Mukherjee is a Bloomberg Opinion columnist covering industrial companies and financial services in Asia. Previously, he worked for Reuters, the Straits Times and Bloomberg News.
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