What does the law say on the US Adani bribery case?

A large Indian conglomerate, Adani Group, and other executives of Adani Green Energy have been charged with serious offences under US laws for a multi-billion dollar alleged fraud.

The United States Securities and Exchange Commission (SEC) claimed on Wednesday that Gautam Adani along with several other defendants had violated the provisions under the US Foreign Corrupt Practices Act of 1977 (FCPA) by offering bribes of more than US $250 million to Indian officials.

In addition, there are allegations that the defendants were also involved in securities and wire fraud, and misrepresentation to procure solar energy supply contracts which were likely to generate US $2 billion in profits for Adani Green Energy over the next 20 years.

The alleged charges concern the US authorities because to raise investments from the US and global investors, Adani Green did not disclose the above facts to US institutions. While Adani Group has denied all the charges against its executives, the matter is still under consideration and the presumption of innocence until proven guilty applies to the above-mentioned defendants.

The Leaflet spoke with Anurag M. Katarki (founder of the Chambers of the Anurag Katarki) and Krati Savita Gautam (senior associate at the Chambers of Anurag Katarki) to discuss a few key legal aspects of the case and simplify the law for those who want to understand the subject better.

What is the maximum and minimum penalty that may be given to the defendants for each of the offences they have been charged with?

The US Department of Justice is responsible for the criminal prosecution of FCPA violations.

Under the FCPA, each act of bribery may incur a fine of up to US $2 million (approximately ₹16.8 crore) for corporations or other business entities.

Individuals may receive a lesser fine but may be exposed to the possibility of imprisonment. The penalty for such a violation by an individual such as a director, officer or stockholder of the company includes a fine of up to US $100,000 (approximately ₹84 lakh) and a maximum of five years in prison.

Such individuals may be charged under the accounting provisions as well, whereby, for each violation, the maximum fine is US $25 million (approximately ₹200 crore) for corporations or other business entities and up to US$ 5 million (approximately ₹40 crore) for individuals. Individuals are also subject to a maximum imprisonment of 20 years for each such offence under the accounting provisions.

The court may exercise its discretion under the Alternative Fines Act, 18 U.S.C. 3571(d) to impose a fine up to twice the amount the offender stood to gain if the fine increase is supported by evidence and the offender pleads guilty or is proven guilty beyond a reasonable doubt.

In the present scenario, since it is rumoured that Adani Green was set to earn US $2 billion (approximately ₹16,800 crore) in profits over the next two decades, therefore, the fines may ratchet up to US $4 billion (approximately ₹33,600 crore).

In a civil injunctive action, the SEC seeks a court Order compelling the defendant to obey the law in the future. Violating such an Order can result in civil or criminal contempt proceedings. Civil contempt sanctions, brought by the SEC are remedial rather than punitive in nature and serve one of two purposes: to compensate the party injured as a result of the violation of the injunction or force compliance with the terms of the injunction.

Where a defendant has profited from a violation of law, the SEC can obtain the equitable relief of disgorgement of ill-gotten gains and pre-judgment interest and can also obtain civil money penalties under Sections 21(d)(3) and 32(c) of the US Securities Exchange Act of 1934.

The SEC may also seek ancillary relief (such as an accounting from a defendant). Pursuant to Section 21(d)(5) of the Exchange Act, the SEC may also seek, and any federal court may grant, any other equitable relief that may be appropriate or necessary for the benefit of investors, such as enhanced remedial measures or the retention of an independent compliance consultant or monitor.