Adani prosecution in the US real — but the FCPA is a red herring

The Adani stocks rallied on Wednesday, 27 November, after the Group denied that the chairman of the group, Gautam Adani, and his nephew Sagar Adani had been booked under the Foreign Corrupt Practices Act (FCPA) in the US.

The filing acknowledged that they had been charged on three counts of (a) alleged securities fraud conspiracy, (b) alleged wire fraud conspiracy and (c) alleged securities fraud, though.

The rally coincided with the hashtag #AdaniNotGuilty trending on X.

The Group had come under severe criticism over the last week or so for violating SEBI rules and not informing the stock exchange and investors of the ongoing investigation against it in the US.

The Group has been aware of the investigation since March 2023, when the FBI seized electronic devices from Gautam Adani’s nephew, after serving him a search warrant. Meanwhile, the Group had actually denied media reports published in Bloomberg about the investigation and called them baseless.

And while this filing to the stock exchange was the first disclosure by the Group, it once again resorted to contradicting media reports as well.

It cited reports in the Times of India and Business Today, which had reported that Gautam Adani, Sagar Adani and Vneet Jaain had been booked under the FCPA in the US by the department of justice. The denial should have gone to the concerned publications, but has figured in the Group’s filings to the stock exchange, creating the impression that the charges against them are unrelated to any corrupt practice.

It is not known if the Group demanded a retraction/apology/correction from the publications themselves.

And there's a catch.

The catch is that ‘FCPA applies only to US citizens/entities, and does not apply to a foreign national who is not an employee of US Company and who is acting outside the US’.

It is up to the Indian regulators and agencies to investigate into the corruption. The FCPA provisions provide the following definitions/descriptions:

• Under the Foreign Corrupt Practices Act (FCPA), it is unlawful for a US person or company to offer, pay, or promise to pay money or anything of value to any foreign official for the purpose of obtaining or retaining business.

• A US person or company may also be any officer, director, employee, or agent of a company or any stockholder acting on behalf of the company. And a foreign official may be a foreign political party or candidate for foreign political office.

• Also covered by the FCPA is the authorisation of any money, offer, gift or promise authorising the giving of anything of value to any person while knowing that all or a portion of it will be offered, given or promised — directly or indirectly — to any foreign official for the purposes of assisting the US person or company in obtaining or retaining business.

• ‘Knowing’ includes the concepts of conscious disregard and wilful blindness

• The FCPA also covers foreign persons or companies that commit acts in furtherance of such bribery in the territory of the United States, as well as US or foreign public companies listed on stock exchanges in the United States or which are required to file periodic reports with the US Securities and Exchange Commission.

The timing of the filing and the text point to an attempt to create the narrative that the Adanis are not guilty of any wrongdoing — and to help the battered Adani stocks to recover.

But also, why is India waiting for the US to act in a case of bribery in India, involving Indian citizens?