The Adani saga continues. Hindenburg made initial claims of malfeasance and followed it up with charges against Madhabi Puri, the Chairman of watchdog SEBI. Neither of these charges stuck. Now, the U.S. Securities and Exchange Commission (SEC) has taken its turn in the spotlight and charged Adani. Adani corruption allegations
In fact, the legal defendants in question are not India’s flagship Adani group or the US NYSE-listed Azure Global Power Limited (NYSE:AZREF) but individuals: Gautam Adani, his nephew Sagar Adani, and others. Charging specific people rather than the firm allows the investigators to disregard whether the individuals are presently with the firms in question—it merely charges that they violated US law by paying bribes abroad and misrepresenting to US investors that they did not do so.
In terms of the “nationalistic” context, as pushed by Adani, the fact is that several other Indian companies have listed on the NYSE and Nasdaq, including HDFC, ICICI, Tata Motors, and Infosys. So, feeling defensive about Indian firms does not hold water. Furthermore, the US may have many weaknesses, including how major companies like Boeing are molly coddled as they lost exponentially more of their investor’s money or escaped criminal charges in spite of hundreds of deaths in their planes. Indeed, there is a great deal of corruption within the US system. However, this business scenario is very simple: if anyone wants to raise funds in the US, they must follow US law, and not pay bribes anywhere in the world. The charge deliberately made high profile through extensive press releases, is that they failed to follow the law.
Proving these charges will be a different story altogether.
First, the SEC will have to prove to a US jury that the bribery did, in fact, take place. This will have to go beyond any SMSes, chats, or discussions and show an actual financial trail, most likely in India. Unless they can somehow convince a jury that the chats are true, or present corroborative evidence showing the funds transfer, this will be a challenge.
Next, the SEC will have to show that the seven individuals named in the 54-page indictment actively enabled the bribery and that it was not some underlings who independently participated in them. At the current time, it appears that that may, in fact, be Adani’s defense strategy. They have already stated that any alleged actions, even if true, were done by individuals who have left the firm.
Finally—and this may not be as easy as it appears—the SEC will have to prove that it was the bribery that was responsible for all or most of the deleterious impact to US investors. Given that the Azure Power stock has gone down from a high of over US $40 to less than a $ 1 today, with the implied market cap dropping from $ 2.5 B to less than $ 50 M, the SEC will have to convince a jury that a $175 million bribe could have caused such a massive drop in market value. Some of the charged individuals, like Ranjit Gupta, have left the firm and Adani could easily claim that they were poor managers, as noted earlier.
Drop of 94% in less than four years. Image courtesy: Google Finance
What is most likely is that while these Adani corruption allegations are not an anti-India indictment, they could well be an anti-Trump salvo. After the US election results were announced, the outgoing Biden government has already sought to queer the pitch for their Republican successors by expediting actions that had previously been under consideration. Biden has already taken some very high-profile actions since Nov 5. This includes the release of additional funds and weapons to Ukraine, the plans to forgive student loans, further criminal justice reform (which, to be fair, was initiated by Trump during his first term), and full or partial federal legalisation of marijuana. The reality is that many of these actions will be challenging for Trump to continue but hard for him to stop. Adani and Modi are also expected to be closer to Trump than they were to Biden, and this could be another attempt to embarrass India. The SEC action has been in the works since 2022. Although on a much lower profile and somewhat speculative, it is possible that the “deep state” in New York, which is largely pro-Biden, may have taken it upon itself to further make the going difficult for the incoming President, precisely after the Democrats lost the election.
Regardless of other motives, however, it is the individuals alone who are under the scanner, and the ones who will have to defend themselves in court. Adani corruption allegations
READ MORE: Never mind India! Are Canada’s leaders its worst enemies?
