Adani vs US regulators | Adani's big legal win in US

The US Department of Justice (DoJ) has permanently dropped all criminal charges against Adani Group chairman Gautam Adani, his nephew Sagar Adani, Adani Green Energy CEO Vneet S. Jaain and others in a $265 million (Rs 2,568 crore) alleged bribery case dating back to November 2024. The group has also settled with the US markets watchdog, the Securities and Exchange Commission (SEC), a related civil case against Gautam and Sagar Adani for allegedly misleading US investors in Adani Green Energy’s $750 million (Rs 7,245 crore) bond offering. The Adanis also agreed to pay $275 million (Rs 2,656 crore) to the US treasury department to settle a civil suit for alleged violations of sanctions in purchase of Iranian gas.

The back-to-back closures of three high-profile cases will come as a major relief for the Adanis. The accusations had rocked the Adani Group for over a year, severely eroding the market value of listed firms and casting a shadow over its ability to raise funds for its aggressive capex plans.

The most significant of these has been the DoJ dropping criminal fraud charges against Gautam Adani, Sagar, Jaain and some executives of Azure Power, an Indian solar power producer that was then listed on the New York Stock Exchange. “We would like to inform you that the US DoJ filed a motion seeking dismissal with prejudice of the charges in the indictment against Mr Gautam S. Adani, Sagar R. Adani and Vneet S. Jaain and other defendants. The US DoJ further reviewed the charges and has decided in its prosecutorial discretion to dismiss the charges,” Adani Green Energy said in a notice to the exchanges on May 18. The settlement comes after two years of efforts to prosecute with no findings.

FULL STEAM AHEAD

Adani Group shares surged on May 19 after news that the criminal fraud charges had been dismissed. While Adani Green Energy soared 3.5 per cent, Adani Total Gas rose 3.3 per cent, Adani Enterprises jumped over 3 per cent, and Adani Energy Solutions and Adani Power added 2.5 per cent each. Adani Ports was up 1 per cent.

In November 2024, the US District Court for the Eastern District of New York had accused Adani, Sagar, Jaain and the other executives of bribing Indian officials of electricity distribution companies (discoms) in four states and one Union territory (UT)—Andhra Pradesh, Chhattisgarh, Tamil Nadu, Odisha and Jammu & Kashmir—to execute power sale agreements under a manufacturing-linked project with the public sector company, the Solar Energy Corporation of India (SECI) between 2021 and 2022. SECI would then buy the power from Adani and Azure Power to sell to the discoms. Of the $265 million (Rs 2,553 crore) alleged bribe, around $228 million (Rs 2,202 crore) was offered to an unnamed high-ranking Andhra Pradesh government official who facilitated the state discom’s purchase of 7 gigawatts (7,000 MW) of power from SECI. With this, the accused violated the Foreign Corrupt Practices Act (FCPA) that bars companies operating in the US from bribing foreign officials, it was alleged. While this was a criminal charge, a parallel civil case by the SEC accused the Adani Group of raising billions of dollars in the US, even as the probes were going on, without disclosing it to investors. The Adani Group denied all charges and took legal recourse in the matter.

However, the allegations dealt a severe blow to the group. Coming close on the heels of the Hindenburg accusations of 2023, they triggered a sharp sell-off in Adani Group stocks, dragging market capitalisation down to nearly Rs 7.5 lakh crore. But, over time, the group staged a strong recovery, with its m-cap rebounding to around Rs 14.5 lakh crore. Sources close to the Adani Group said the DoJ dropped the charges since the review failed to produce any findings capable of sustaining them. The case was impermissibly extra-territorial. Moreover, there was insufficient evidence to sustain the allegations. The arguments that Adani’s lawyers put across to the DoJ were that no offence was committed in the US, nobody lost any money, and the US has not been harmed in any manner.

In the second case, the SEC dropped fraud charges against Gautam and Sagar after the Adani Group agreed to pay a combined settlement of $18 million (Rs 174 crore). The moment the SEC settled, the case filed by the DoJ also collapsed, sources said. The settlement was reached, with the Adani Group neither admitting to any wrongdoing nor denying it. Sources also said the settlement amounts were quite modest compared to other recent cases that involved hundreds of millions or even billions of dollars. Moreover, the criminal case has been ‘dismissed with prejudice’, meaning it cannot be reopened, the strongest form of dismissal available in the US.

NO GOING BACK

Adani’s legal defence involved extensive engagements by a team of six legal counsels, including Sullivan & Cromwell, Nixon Peabody, Hecker Fink, Norton Rose Fulbright, Bracewell and Cyril Amarchand Mangaldas. ‘Neither admitting nor denying’ is the standard formulation used in all SEC civil settlements that are resolved. It means Gautam and Sagar Adani resolved the action by agreeing to pay a civil penalty to avoid contested litigation and focus on business operations.

In the third case, group flagship firm Adani Enterprises Ltd (AEL) agreed to pay $275 million (Rs 2,662 crore) to the US Treasury to settle a probe into alleged violations of sanctions on Iran. The US treasury department’s Office of Foreign Assets Control (OFAC) said the Indian conglomerate extended “extensive cooperation” with the investigation and made “proactive” disclosures. Adani Enterprises had bought shipments of liquefied petroleum gas (LPG) from a Dubai-based trader purporting to supply Omani and Iraqi gas that had actually originated from Iran. OFAC has now closed the matter and released AEL from civil liability, without making any finding of fault or wrongdoings and discharged of all liabilities, say sources. AEL will pay $275 million as settlement, which is lower than the maximum possible penalty of about $384.2 million. “The reduction is due to self-reporting, proactive engagement and full cooperation with OFAC,” sources added.

CREDIBILITY RESTORED

According to Sandeep Parekh, managing partner with Finsec Law Advisors, almost all cases in the SEC are decided by settlement. It’s the same with most cases in DoJ too. “Therefore, this was something that was expected. This will put an end to all the litigation,” he said.

The Adani Group has massive plans to raise money going forward, and the legal reprieves pave the way for attracting both debt and equity. It also facilitates re-pricing of existing debt, says Deven Choksey, MD, DRChoksey FinServ. “The group’s credibility has been restored, especially as this is a settlement and not a penalty,” he told india today. “This will help in raising equity and debt capital in the future.”

In March, Adani Ports and SEZ MD Karan Adani had said that the group had a greenfield capex plan of Rs 2 lakh crore annually for the next five years. “We will be moving from renewable capacity of 18 gigawatt (GW) to almost 50 GW by 2030. Port capacity will move from 600 million tonnes per annum (MTPA) to 1.2 billion MTPA. Thermal capacity will move from roughly 17 GW to 35 GW by 2031. Airport capacity will jump from 100 million passengers to 200 million passengers by 2030,” Adani had said at the India Today Conclave in Delhi in March.

In November 2024, Adani had congratulated Donald Trump on X after he became president for a second time: “As the partnership between India and the US deepens, the Adani Group is committed to leveraging its global expertise and investing $10 billion in US energy security and resilient infrastructure projects, aiming to create up to 15,000 jobs.” Adani Group sources, however, have denied any connection between Adani’s statements then and the dropping of criminal charges against group executives now, as some media organisations in the US have reported.