Indian billionaire Adani, 3 ex-Canadian pension fund executives accused of fraud

Indian billionaire Gautam Adani, one of Asia’s richest men, could face his biggest challenge yet with an indictment by US prosecutors for alleged fraud and bribery. But it is unclear how the case will affect his business and his own future, as well as the Indian economy and government.

On Friday, shares in some of the Adani Group companies started to recover after falling a day earlier after the charges were announced in New York. Share prices of six of the 10 listed companies rose slightly, between one percent and nearly four percent.

Adani, a major Indian power player perceived to be close to Prime Minister Narendra Modi, was charged Wednesday with securities fraud and conspiracy to commit securities and wire fraud in a court in Brooklyn, NY.

The test for the tycoon and his multibillion-dollar empire, which spans everything from energy and ports to media and agriculture, comes just as the 62-year-old founder and his holdings recovered from lost more than $60 billion in market value in early 2023 following allegations of stock price manipulation and fraud by short-selling firm Hindenburg Research.

It also raises questions about corporate governance and crony capitalism in India’s economy, which Modi has promised to make the world’s third largest, and stepped up scrutiny of the huge influence of large family-run conglomerates. The richest man in Asia is another Indian billionaire, Mukesh Ambani of Reliance Industries.

Prosecutors say Adani duped investors in a massive solar project in India by concealing that it was facilitated by bribes. Seven other executives linked to Adani’s massive business holdings also face charges, including three former executives at Quebec’s largest pension fund, the Caisse de dépôt et placement du Québec (CDPQ).

The indictment outlines an alleged scheme to pay approximately $265 million in bribes to government officials in India.

Cyril Cabanes, Saurabh Agarwal and Deepak Malhotra, who have all held senior positions at CDPQ, are according to reports accused of obstructing a grand jury, the FBI and the US Securities and Exchange Commission.

“CDPQ is aware of the charges filed in the US against certain former employees,” a spokesperson told CBC News. “Those employees were all fired in 2023 and CDPQ is cooperating with US authorities. In light of the pending cases, we have no further comment at this time.”

The group denies the allegations against the green energy group

Adani Group has denied the allegations against executives of Adani Green Energy, its renewable energy division, as “baseless” and said it would seek an appeal. Shares in Adani’s green energy company, which is at the center of the case, fell eight percent on Friday.

None of the people accused in the case have been arrested.

“For Adani, this hits hard no matter how you slice it,” said Michael Kugelman, director of the South Asia Institute at the Wilson Center.

“His public relations machine has been in high gear for nearly two years, rehabilitating his image in the wake of the Hindenburg allegations. This indictment came like a bolt out of the blue and instantly reversed all recent progress in saving his reputation and business empire,” Kugelman said.

Adani’s footprint in the Indian economy is deep. It is the country’s largest coal mine operator and infrastructure developer, operates several ports and airports, and employs tens of thousands of people. Despite its fossil fuel roots, Adani has ambitions to become the world’s largest renewable energy player by 2030.

Analysts say a key factor in his meteoric rise over the years has been his knack for aligning his group’s priorities with those of the Modi government, investing in key industries such as renewable energy, defense and agriculture. Before Modi, Adani was friendly with other parties in power.

The latest controversy is likely to put Modi’s Bharatiya Janata Party-led government, seen as close to Adani, in an awkward spot.

Amit Malviya, the BJP’s IT chief, said in a post on X that the US charges were “accusations and defendants are presumed innocent unless and until proven guilty,” which critics interpreted as a show of support for the Adani group .

The main opposition party seized on the controversy, calling for Adani’s arrest and accusing Modi, who has sometimes campaigned using an Adani jet, of protecting him. Opposition lawmakers are likely to step up pressure on Modi when the winter session of parliament begins next week.

The controversy has already affected Adani’s overseas interests.

Kenya’s president has canceled multimillion-dollar contracts with the Adani group for airport upgrades and energy projects. Adani is also likely to face scrutiny in Bangladesh, where a court on Tuesday ordered an inquiry into a power project.

Its troubles could complicate India’s ties with other countries such as Sri Lanka, where New Delhi competes with rival Beijing for strategically important markets.

There’s no question this is “bad timing for New Delhi,” Kugelman said, as it comes at a time “when it’s trying to capitalize on the business world’s desire to move manufacturing out of China and find alternative investment destinations.” .

Could Trump step in?

On India-US relations, some analysts believe that President-elect Donald Trump may intervene.

“India would like nothing more than for Trump to stop the investigation once he takes office. It’s unlikely. Trump, however, may have a positive opinion of Adani, a businessman who has effusively praised Trump,” Kugelman said.

The case highlights business risks in India, although experts believe the impact on investors will be mainly limited to the Adani group.

“There are no fears of financial contagion – at the moment the effect is group-centric rather than market-centric. It could slow the group’s expansion and growth as it becomes more difficult for Adani to raise funds,” Ambareesh said. Baliga, an independent market analyst.

However, for many in India, the news is not so surprising.

Investors already know “how ingrained this (bribery and corruption) is in the fabric of the Indian economy — you can’t miss it,” Baliga said. “Initially, investors may stay away for a while, but at the end of the day, they will come back (to Adani). This is not a small or medium-sized group that I can ignore.”