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Can Gautam Adani Get Out Of The Latest Scandal? Yes, Say Legal Experts. How Adani “Mislead” About The Awareness Of The Investigation And How SEBI Has Failed Yet Again?
Gautam Adani, founder-chairman of the Adani Group, is in the eye of yet another storm however this time, the allegations are serious—foreign bribery, securities fraud, and wire fraud conspiracies, as charged by US prosecutors.
The legal noise around the case is deafening, with opinions ranging from outright condemnation to cautious optimism about his chances and surprisingly, legal experts are leaning toward the latter, suggesting Adani might scrape through.
Here’s is how and why –
Innocent Until Proven Guilty
First things first, the US Department of Justice has clarified that these charges are allegations, and Adani and others are presumed innocent until proven guilty. This cornerstone of the justice system means the road to conviction is long and not without hurdles for prosecutors.
Still, Adani’s legal team has its work cut out. The immediate task is to dissect the evidence collected by US investigative agencies and challenge the grand jury’s indictment. Experts suggest procedural grounds may be the first line of defense. For instance, Adani’s team could question whether US prosecutors have jurisdiction to bring these charges.
Until Adani personally appears before a US court, his attorneys can focus on procedural objections, such as whether proper notice has been served. The US Constitution’s Procedural Due Process Clause ensures defendants receive adequate notice and an opportunity to defend themselves.
Once in court, Adani could challenge the indictment’s legal basis or argue that the allegations lack sufficient evidence.
According to Mahesh Agarwal, managing partner at Agarwal Law Associates, the case might not hold water due to jurisdictional flaws and its perceived political undertones.
Sameer Parekh, another legal expert, points out that extradition under the India-US treaty has its own hurdles, including proving that the alleged offenses are punishable in both countries.
The US Justice Process Could Be A Long Road
If Adani and his team refuse to engage, US prosecutors could seek extradition. However, such requests require substantial documentation, including arrest warrants and evidence of the alleged crime.
But if extradited or if Gautam Adani voluntarily appears, the process unfolds as follows –
Arraignment: Adani would appear in a New York court, where he could plead guilty or not guilty. A guilty plea skips the trial, leading directly to sentencing.
Trial: If he pleads not guilty, a trial date would be set, where both sides present evidence. Conditions like travel restrictions might apply during this period.
Sentencing: If convicted, the judge determines the punishment.
Another potential route could be a plea agreement—Adani admitting to certain charges for a reduced sentence. However, this would depend on the prosecutor’s willingness and judicial approval.
Legal experts warn that even if a trial begins, it won’t be a smooth ride for prosecutors. Adani’s attorneys would likely contest the admissibility of evidence and argue procedural flaws. The involvement of seven co-defendants could complicate proceedings further, with requests for separate trials potentially delaying the case.
The Cover-up Attempt
After a Bloomberg report brought attention to the Adani Group’s involvement in a potential anti-corruption investigation, the company’s leadership allegedly moved swiftly to suppress the story.
—On March 17, 2024, the head of corporate finance for the conglomerate reportedly emailed a lender involved in the 2021 Syndicate Loan and a joint bookrunner for the 2024 144A Bond issue. These emails were designed to dismiss the Bloomberg article as “baseless,” “malicious,” and “defamatory.” Notably, the emails were sent to more than a dozen financial institutions, all copied to Sagar Adani.
This swift attempt to control the evolving story was part of a larger strategy, as these communications were meant to assure investors and lenders that the company had no knowledge of any investigation. But it didn’t stop there. The very same day, similar emails were sent to multiple other financial institutions, dismissing the claims outright.
Denial of Knowledge
Two days later, on March 19, 2024, the head of corporate finance reportedly took further steps to reassure the financial world. He sent letters to institutions, citing a communication from the Indian Energy Company to the NSE and BSE.
—In these letters, the company falsely claimed it had not received any notice from the US Department of Justice regarding the allegations. The letters further misrepresented the situation, stating that the company was only “aware of an investigation” into a third party, not its own operations.
This, this was a clear effort to downplay the severity of the situation and give the impression that the allegations were baseless.
Yet….The Subtle Acknowledgment
Despite the dismissals, there were signs of a more complicated reality in the fine print.
Adani Green Energy, one of the subsidiaries of the conglomerate, issued a bond offer document in 2024 after a successful $409 million bond issue. In the document, it subtly acknowledged the ongoing anti-corruption investigation, although it did so in a way that downplayed its significance.
The document noted that Adani Green’s operations, along with its officers and personnel, were “subject to or exposed to present inquiries and investigations under the anti-bribery or anti-corruption laws of other countries (such as the US Foreign Corrupt Practices Act).”
While this document raised concerns about potential exposure to anti-corruption investigations, the Adani Group’s public statements to the BSE and NSE contradicted this acknowledgment. The company claimed that no investigation was currently taking place, which directly misled investors and the public.
Misleading Assurances in the Offering Circulars
As part of its efforts to facilitate its bond offering, Adani Green provided potential investors with Offering Circulars, a key document meant to provide transparency about the company’s operations, risks, and compliance measures.
The Offering Circulars included warnings about potential “Risk Factors,” including exposure to liability under anti-bribery laws. They emphasized the company’s commitment to adhering to anti-corruption and anti-bribery laws, with policies designed to prevent improper payments to government officials.
However, these assurances were materially misleading. While the Offering Circulars listed potential risks, they presented the issue of bribery as a hypothetical scenario.
This was far from the reality, as the indictment alleges that senior executives within the Adani Group, including Gautam and Sagar Adani, were actively involved in the bribery scheme.
The circulars also falsely assured investors that Adani Green’s renewable energy contracts were secured through “transparent and competitive tender processes.” This claim ignored the reality of an ongoing scheme that allegedly involved improper practices and raised serious questions about the company’s governance.
A Pattern of Misleading Statements
The most troubling part of this situation is not just the alleged cover-up, but the ongoing pattern of misleading statements coming from the Adani Group. The company has repeatedly downplayed the severity of the allegations, misrepresented facts, and failed to be transparent with investors and regulators. What started as a simple allegation of wrongdoing has now spiraled into a series of complex legal and financial missteps.
As the case progresses, and whether these misleading statements will have lasting consequences remains to be seen, but they have certainly raised more questions than they’ve answered
SEBI Comes In But With An Already Tarnished Reputation!
According to a recent report the Securities and Exchange Board of India (SEBI) is set to investigate Adani Green Energy Ltd for allegedly making false disclosures to Indian stock exchanges.
The investigation stems from concerns over whether the company violated SEBI’s Listing Obligations and Disclosure Requirements (LODR) Regulations, particularly Regulation 30 and Schedule III, which mandate that listed entities disclose all material events or information that could impact investors or the company’s operations.
At the core of this issue is SEBI’s regulatory framework, which is designed to ensure transparency and fairness in the Indian securities market. Regulation 30 of the LODR specifically requires companies to disclose any event or information that could significantly affect their operations or the investment decisions of the public. Similarly, Schedule III lays out clear guidelines for what needs to be disclosed in case of material events.
But it doesn’t stop there.
SEBI’s Prohibition of Fraudulent and Unfair Trade Practices rules also come into play. These rules explicitly state that no individual or entity should indulge in any manipulative or fraudulent practice in the securities market, including issuing false declarations that could mislead investors. If Adani Green is found to have violated these rules, the consequences could be severe.
SEBI has already faced criticism for its handling of past allegations against the Adani Group, particularly following the explosive January 2023 report by Hindenburg Research. The report accused the Adani Group of stock manipulation, accounting fraud, and other corporate misdeeds. SEBI launched multiple investigations in response, but progress has been slow, and many have raised doubts about the regulator’s ability to bring powerful corporate entities to justice.
By August 2023, SEBI informed the Supreme Court that it had completed 22 out of 24 investigations related to the Adani-Hindenburg matter. However, the remaining two investigations were delayed due to difficulties in obtaining information from foreign regulatory agencies. This slow pace has only deepened public skepticism about SEBI’s effectiveness in holding corporations accountable.
Conflicts of Interest And Allegations Against SEBI Chairperson
Adding to SEBI’s troubles are serious allegations of conflicts of interest involving its Chairperson, Madhabi Puri Buch.
In August 2024, reports surfaced suggesting that Buch and her husband held stakes in offshore funds linked to the Adani Group. These allegations, which were first raised by Hindenburg Research, have sparked concerns about potential bias in SEBI’s handling of investigations into the Adani Group.
Buch has denied any wrongdoing and has publicly stated that she recused herself from Adani-related matters. However, critics argue that her position at SEBI during these investigations raises questions about the impartiality of the regulator.
The Lokpal, India’s anti-corruption body, has since sought an explanation from Buch, asking for greater transparency and accountability within the regulatory system.
What Is SEBI’s Credibility
The combination of slow investigation progress and allegations of conflicts of interest has cast a shadow over SEBI’s credibility. The regulator, tasked with ensuring fair play in India’s securities market, is now under intense scrutiny. Opposition leaders are demanding that SEBI demonstrate greater impartiality and rigor in its investigations, particularly in light of the new allegations against Adani Green.
The current investigation into Adani Green Energy only amplifies concerns about the regulator’s ability to take swift and decisive action. If SEBI fails to address these issues effectively, it risks further damaging its reputation and raising questions about its capacity to regulate powerful corporate entities like the Adani Group.
As the investigation into Adani Green Energy unfolds, all eyes will be on SEBI to see whether it can take meaningful action and restore faith in its ability to uphold the rule of law in India’s financial markets.
Still, the Same Story…
Regardless of the legal outcome, the scandal raises broader questions about the ethics of doing business. Contracts, licenses, and government permissions—often tainted by corruption—are at the heart of such cases.
Legal luminaries may argue the finer points of law, but the underlying issue remains – the deeply entrenched systems that enable such scandals in the first place and the inability of SEBI to do its very job under a leadership that is already under scrutiny – where and who do investors turn to?