Adani bribery case: whistleblowers, WhatsApp texts, and ‘incentives’

Two whistleblower complaints flagging financial impropriety at a small New York Stock Exchange-listed company marked the start of a two-year probe by the US government into the Adani group. On Thursday, the probe culminated in the indictment of billionaire Gautam Adani and seven others in a $250 million bribery scam, sinking the stocks of the Indian conglomerate.

Adani group denied the allegations by the US Department of Justice and the US Securities and Exchange Commission, terming the allegations against its directors, including Gautam Adani and his nephew Sagar Adani, “baseless”.

The NYSE-listed company, Azure Power Global Ltd, had disclosed in its annual report for 2022-23 that its audit committee had received two whistleblower complaints—in May 2022 and September 2022—detailing improper payments to Indian government officials.

An internal probe did not find any wrongdoing, the New Delhi-headquartered company said, sharing the complaints and its investigation with the US justice department and market regulator.

“We have disclosed the details of the Special Committee’s investigation to the SEC and the US Department of Justice, and we continue to cooperate with those agencies,” Azure Power stated in its annual report for the financial year ended March 2023.

As part of its probe, the US Federal Bureau of Investigation (FBI) served a grand jury subpoena notice to Sagar Adani in March last year. The Adani group did not disclose this information when Adani Green Energy Ltd raised $2 billion from foreign investors, including American investors, according to the US justice department.

Also read | Mint Explainer: The US indictment of Gautam Adani

“[D]espite knowing certain of the subject offenses and individuals under investigation by the United States government, the defendants Gautam S Adani and Sagar R Adani not only concealed the Bribery Scheme from financial institutions and investors in the United States and elsewhere but also caused others to make false and misleading statements regarding their awareness and knowledge of the United States government's investigation and its subjects,” the US Department of Justice said in a statement dated 20 November.

Gautam Adani is the chairman of Adani Green Energy, and Sagar Adani is executive director.

The charges come just as the Adani group managed to move past the impact of allegations of stock market manipulation and accounting fraud levelled by US short-seller Hindenburg Research in January last year.

On Thursday, Adani Green Energy halted plans for a $600 million fundraise through US dollar bonds after the latest allegations surfaced. Also, Adani group stocks lost about ₹2.24 trillion on NSE after the US probe charges surfaced.

The motive

Azure Power, which decided to delist from NYSE in November last year, was founded by Inderpreet Wadhwa, an Indian-American renewable energy entrepreneur in 2008.

In 2016, Azure became the first homegrown company listed on NYSE. Subsequently, in 2019 and 2020, it issued preferential shares to Caisse de dépôt et placement du Québec (CDPQ), a Canadian pension fund managing $450 billion in assets.

By the end of 2020, CDPQ owned 51% of Azure Power.

In December 2019, Solar Energy Corporation of India, or SECI, shortlisted Azure Power and Adani Green Energy to construct solar cells and produce 10 GW of power. Azure Power’s share was to produce 2GW of solar energy, and Adani Green’s 8 GW (equivalent to about 8 billion watts of electricity).

SECI, a company under India’s ministry of new and renewable energy, oversees New Delhi’s renewable energy plans, including funding large solar projects such as those by Azure Power and Adani Green.

“Both Azure and Adani Green were projected to earn billions in revenue from the Projects,” the US Securities and Exchange Commission said in a case filed against Cyril Cabanes, former chief executive of Azure Power Global, in a New York court on 20 November.

But there was one major obstacle to the projected earnings.

An agreement hadn’t been reached to buy the power produced by Azure and Adani Green.

Also read | Adani Green’s on a roll to build capacity. But first, it needs to find buyers.

“Indian state governments and DISCOMS (state-owned energy distribution companies) continued to balk at entering into PSAs (power supply agreements) with SECI to purchase energy at the prices in the contracts awarded to Azure and Adani Green,” the US SEC said in its complaint.

Because of volatile energy prices post the 2019 tender, SEC said, “the state governments and DISCOMs rightfully believed they would be able to purchase power less expensively elsewhere”.

“The bottom line for both Azure and Adani Green was that they each stood to lose billions of dollars of potential revenue unless Indian state governments and their related DISCOMs entered into PSAs with SECI,” the US markets regulator added.

Hence, two additional contractual steps were needed.

One, SECI needed state-owned energy distribution companies to sign new agreements to commit to the power. Two, SECI had to draft new contracts with Azure and Adani Green detailing the price at which power would be bought.

Here is where, the US authorities believe, that Azure and Adani Green executives paid kickbacks.

The US securities regulator alleged that senior executives of Azure and Adani Green “schemed to pressure and to propose to pay ‘incentives’ directly to state government officials in India (i.e., bribes) to cause Indian state government entities and the related DISCOMs to enter into PSAs with SECI at prices favorable to Azure and Adani Green”.

Bribe per megawatt

In a WhatsApp conversation dated 25 February 2021, Sagar Adani wrote to Ranjit Gupta, the then-CEO of Azure Power, that, “Just so you know, we have doubled the incentives to push for these acceptances.”

The conversation related to the state electricity distribution companies of Jammu and Kashmir and Chhattisgarh being asked to sign agreements with SECI.

“The motivation and incentives referred to in the WhatsApp messages were bribes payments to state government officials in India,” the US SEC said in its complaint.

Adani Green executives “kept track of the bribes, creating and maintaining records of bribes that had been paid or promised to numerous Indian states and Indian state officials to induce them to cause the Indian states to buy renewable energy from SECI”, the US regulator added.

Gautam Adani had met Andhra Pradesh government officials in August 2021, and Sagar Adani met them on 12 September 2021, the SEC said in its charges.

Also read | Adani Group adopts strategy to manage, diversify borrowings in wake of Hindenburg crisis

“At or in connection with these meetings, the Adanis (Gautam and Sagar) paid or promised a bribe to Andhra Pradesh government officials to cause the relevant Andhra Pradesh government entities to enter into PSAs with SECI for the purchase of 7,000 MW of power capacity,” said SEC.

“Adani Green records and later statements by Adani Green executives to the Azure Chairman indicated that the Andhra Pradesh bribe payment was about $200 million. Shortly after these meetings, Andhra Pradesh agreed in principle to execute a PSA with SECI that would directly benefit Adani Green and Azure,” it added.

In its complaint, the US market regulator added that during in-person meetings between Adani group and Azure Power executives in Ahmedabad, the bribes to be paid to Andhra Pradesh government officials were set at ₹25 lakh for 1 megawatt of power to be bought from SECI.

“7,000 megawatts multiplied by 25 lakh, which equals 17.5 billion rupees, or 1,750 crore (a multiple of ten billion rupees)—i.e., more than $200 million,” said SEC.

The bribe notes

The US Department of Justice in its finding on the alleged bribes paid by the Adani Group is more revelatory.

“During and in furtherance of the Bribery Scheme, the defendant Sagar R Adani used his cellular phone to track specific details of the bribes offered and promised to government officials (the “Bribe Notes”),” the US justice department said in its charges.

“The Bribe Notes identified: (i) the state or region for which government officials had been offered a bribe; (ii) the total amount of the offered bribe; and (iii) the approximate amount of solar power the state or region would agree to purchase in exchange for the bribe. In most instances, the Bribe Notes also identified the per megawatt rate for the total bribe amount offered, the abbreviated titles of the government officials who would receive the bribes, and/or the allocation of the total bribe amount among government officials within each state and region,” the US justice department said.

Mint independently cannot ascertain the details, including how the alleged kickbacks were paid or received, as disclosed by the US Department of Justice and the US Securities and Exchange Commission. The indictment is the first step after concluding the investigation, and the authorities will need to present evidence of wrongdoing to press their case. 

‘Innocent until proven guilty’

Azure Power’s revenue more than doubled from ₹992.6 crore in the year ended March 2019 to ₹2,074.8 crore in the year ended March 2023. Adani Green Energy’s revenue jumped from ₹2,058 crore in March 2019 to ₹10,460 crore in the year ended March 2024.

Adani group on Thursday denied the allegations, referring to the indictment, which states that the charges are “allegations, and the defendants are presumed innocent unless and until proven guilty”.

“All possible legal recourse will be sought,” said a spokesperson for the Adani group.

“The Adani Group has always upheld and is steadfastly committed to maintaining the highest standards of governance, transparency and regulatory compliance across all jurisdictions of its operations. We assure our stakeholders, partners and employees that we are a law-abiding organisation, fully compliant with all laws.”