Fallout from $250 Million Adani Bribery Scandal Hits Three Continents

Bribe locally, fundraise globally.

That pretty much sums up the business philosophy of Indian billionaire Gautam Adani laid out by US prosecutors late Wednesday. On Thursday, reverberations from the US indictment accusing the powerful tycoon of paying off government officials exploded across three continents.

The Big Man, Mr. A, and Numero Uno

The allegations: Adani and his nephew Sagar agreed over the last four years to bribe Indian government officials to the tune of $265 million, according to US officials. They say he did it to secure contracts for his eponymous conglomerate, Adani Group, that would rake in $2 billion in profit over the next two decades, including one to develop India’s biggest solar plant. They then turned around and borrowed over $3 billion in loans and bond issuances obtained under false pretenses, a fraud scheme that involved unknowing US lenders, according to prosecutors.

So why is the US Department of Justice involved? It’s illegal for foreign companies that raise money from US investors to pay overseas bribes. It’s also illegal to raise money from investors while making false representations to them. Adani raised some $175 million from US investors during the alleged scheme, according to the SEC.

Why Adani matters: At $85 billion, his net worth makes him one of the two dozen richest people on earth. His firm dabbles in ports, factories, power plants, mining, food, TV news, you name it. Much of its business is sourced from government contracts, bringing him close to powerful leaders, including Indian Prime Minister Narendra Modi. The fallout is already global:

• Kenyan President William Ruto on Thursday canceled a procurement process to expand the country’s largest airport, located in Nairobi, because it included a proposal by Adani. He also moved to kill a $700 million deal with Adani Group to build power transmission lines.
• Shares in Adani went into a tailspin Thursday, falling 23%, or more than $30 billion, and the company scrapped an imminent $600 million bond sale.

Victory Lap: Swashbuckling short-seller Hindenburg Research savaged Adani last year as “the largest con in corporate history,” alleging stock manipulation and accounting fraud in a scathing report. If Hindenburg still holds any short positions, that’ll be a nice Christmas bonus.