In 2024, the DOJ criminally charged various individuals in connection with an alleged Indian bribery scheme. (See here for the prior post).
Gautam Adani (a citizen of India and founder of the Adani Group which includes numerous portfolio companies including Adani Green Energy – and Indian energy company) was charged with securities fraud conspiracy and wire fraud conspiracy.
Sagar Adani (a citizen of India and Gautam Adani’s nephew and Executive Director of Adani Green’s Board of Directors) was charged with securities fraud conspiracy and wire fraud conspiracy.
Vneet Jaain (a citizen of India who was the CEO of Adani Green and who is currently the Managing Director of Adani Green’s Board of Directors) was charged with securities fraud conspiracy and wire fraud conspiracy.
Ranjit Gupta (a citizen of India who was the CEO of Azure Power Global Limited and CEO and Managing Director of an Azure subsidiary) was charged with conspiracy to violate the FCPA’s anti-bribery provisions.
Cyril Cabanes (a citizen of Australia and France who was previously a member of the board of directors of Azure served as a representative of the company’s largest stockholder, Caisse de dépôt et placement du Québec (“CDPQ”) was charged with conspiracy to violate the FCPA’s anti-bribery provisions and conspiracy to obstruct justice.
Saurabh Agarwal (a citizen of India employed by CDPQ who reported to Cabanes) was charged with conspiracy to violate the FCPA’s anti-bribery provisions and conspiracy to obstruct justice.
Deepak Malhotra (a citizen of India employed by CDPA who was a member of the board of directors of Azure) was with conspiracy to violate the FCPA’s anti-bribery provisions and conspiracy to obstruct justice.
Rupesh Agarwal (a citizen of India who served as a consultant for Azure and then as Chief Strategy and Commercial Officer for Azure) was charged with conspiracy to violate the FCPA’s anti-bribery provisions and and conspiracy to obstruct justice.
The docket for this matter does not indicate any meaningful activity since.
In connection with the same core conduct alleged by the DOJ, the SEC also charged Cabanes with violating the FCPA’s anti-bribery provisions. (See here for the prior post). The docket for this matter does not indicate any meaningful activity since. The November 2024 SEC FCPA enforcement action against Cabanes was the first SEC FCPA enforcement action against an individual since October 2020 and remains the only SEC FCPA individual enforcement action since October 2020.
As highlighted in the prior post, the SEC also charged Gautam Adani and Sagar Adani with securities fraud (non-FCPA) in connection with the same alleged bribery scheme.
Recently, counsel for the Adani’s informed the judge in the case (Nicholas Garaufis – E.D.N.Y.) of an upcoming motion to dismiss. The letter to Judge Garaufis summarizes the case as follows:
“In September 2021, Adani Green, which is not a U.S. registrant, conducted a $750 million bond offering pursuant to SEC Rule 144A and SEC Regulation S, which are registration exemptions for private resales to qualified institutional buyers (“QIBs”) and for non-U.S. sales, respectively. Adani Green sold all of the Notes from the Offering outside the United States, via a Subscription Agreement, to non-U.S.
underwriters, who later resold the Notes to QIBs. A fraction of those resales— in transactions to which Adani Green was not a party—are alleged to have been made to “investors in the United States.”The SEC claims that certain general ESG and anti-bribery statements in the Offering Circular and Subscription Agreement were materially false and misleading because Defendants failed to disclose an alleged scheme to bribe Indian state government officials in India. Because the SEC could not charge Defendants under the Foreign Corrupt Practices Act, it instead recast its charges as a securities fraud case. Although not relevant to this motion, Defendants dispute that there is any credible evidence supporting the purported bribery scheme. Notably, the SEC does not allege that there were any investor losses, and there were none. The bonds have matured, and Adani Green repaid all principal and interest in full to investors in 2024.”
The letter to Judge Garaufis then previews the motion to dismiss as follows.
Motion to Dismiss for Lack of Personal Jurisdiction
“At the threshold, this Court should dismiss the claims against Defendants under Rule 12(b)(2) for lack of personal jurisdiction. As relevant here, the SEC must plead that Defendants had sufficient “minimum contacts” with the United States—that is, they “purposefully directed” their activities at the United States—and that the claims against them arose out of those activities. […] With respect to Gautam Adani, the Complaint does not come close. As Chairman of India’s largest integrated infrastructure group, Gautam Adani was not involved in Adani Green’s Offering. Fatally, the Complaint does not allege that Gautam Adani authorized the issuance of the bonds or otherwise personally directed any relevant conduct at the United States.
Instead, the Complaint impermissibly relies on Gautam Adani’s position as Chairman of Adani Green and his membership on its Management Committee. But personal jurisdiction must be predicated on “his activities,” not those of a company. […] As such, the alleged conduct of Adani Green’s Management Committee, including that it “reviewed and approved” the Offering Circular […] is not sufficient to establish personal jurisdiction over Gautam Adani. […] In fact, Gautam Adani did not attend a single Management Committee meeting of Adani Green from 2020 to 2024 at which the Offering or any statement made in the Offering Circular was discussed or approved, and he did not otherwise approve the Offering or any statement made in the Offering Circular.
Similarly, the Complaint’s general allegations […] that Sagar Adani was authorized to take action with respect to the Offering documents, chaired certain Adani Green committees, and received drafts of the Subscription Agreement purport to show a connection to the challenged statements that is too attenuated to demonstrate purposeful availment of a U.S. forum. The Complaint fails to tie Sagar Adani to a single allegedly false or misleading statement, much less one directed at U.S. investors.”
Motion to Dismiss for Failure to State a Claim
The SEC’s Claims Are Impermissibly Extraterritorial.
As the Supreme Court has made clear, Section 10(b) and Rule 10b-5 do not apply extraterritorially. […] Thus, to invoke Section 10(b), the SEC must plausibly allege a “domestic transaction[]” involving the Notes. Id. at 267. In the Second Circuit, the SEC must plead that “irrevocable liability was incurred or title was transferred within the United States.” […] The SEC has not done so. The Complaint claims that “Adani Green sold at least $175 million [in] Notes to investors in the United States.” But that allegation says nothing about where irrevocable liability was incurred. The mere fact, taken as true, that some downstream investors were located “in the United States” is “irrelevant” to this inquiry. […] omitted). Relatedly, the Complaint alleges that the Notes were “deposited with the Depository Trust Company (‘DTC’)[,]” and that “title to the Notes [was] registered in the name of Cede & Co. . . . as nominee for DTC . . . . in New York.” (Compl. ¶ 129.) Writing for the Second Circuit, Your Honor “reject[ed] [the] argument that a securities transaction
is ‘domestic’ . . . if it settles through the DTC.”Moreover, a domestic transaction alone “would not suffice” if, as the Complaint alleges, there is a “dominance of . . . foreign elements.” […] The SEC’s claims here solely involve Indian Defendants, an Indian issuer, securities not registered with the SEC and not traded on any U.S. exchange, and underlying conduct alleged to have occurred exclusively in India. […] Tellingly, the Complaint does not allege that the underwriters who purchased the Notes from Adani Green were U.S. institutions (they were not), or that the Subscription Agreement underlying the purchases was governed by U.S. law (it was not). This case is thus conclusively beyond the reach of the U.S. securities laws. Indeed, we are aware of just one other litigated case brought by the SEC challenging a Rule 144A offering, which, unlike this one, involved a U.S. issuer and, in any event, ended with no finding of liability.
None of the Alleged Misstatements Is Actionable
The Complaint also challenges statements that the Second Circuit has repeatedly held are inactionable as a matter of law. These include statements about Adani Green’s ESG and anti-bribery commitments, reputation and competitive strengths, and risk factor disclosures acknowledging potential exposure to anti-corruption laws. […] In this Circuit, it is “well-established” that aspirational, “general statements about reputation, integrity, and compliance with ethical norms are inactionable ‘puffery.’”
To be material, a statement “must be sufficiently specific for an investor to reasonably rely on that statement as a guarantee of some concrete fact or outcome.” That is especially true where, as in this case, the only U.S. purchasers of the Notes were a limited number of sophisticated QIBs, which must own and invest at least $100 million in securities. Here, the general ESG-related statements—such as that “Adani Green’s major objectives . . . included . . . ‘to integrate Sustainability and ESG . . . aspects into [its] business’” and about adopting an “ESG Framework”—provided no such concrete, measurable benchmarks.
The Second Circuit has repeatedly rejected similar statements as inactionable puffery. […]. The same is true of the challenged statements about competitive strengths, such as that “[Adani Green] benefit[s] from the support, vision, resources and experience of Adani Group . . . [and its] strong track record of executing large-scale projects.” These vague claims are inactionable. […]
Similarly, the challenged risk factor disclosures, such as that Adani Green’s “employees might take actions that could expose us to liability under anti-bribery laws,” are inactionable. Indeed, those disclosures “expressly cautioned” that compliance measures could fall short and, therefore, could not have been misleading, let alone material.
Defendants’ Lack of Involvement in the Offering Bars the SEC’s Claims Against Them
Nor can the SEC show that Defendants were responsible for the challenged statements. Under Janus Capital Group v. First Derivative Traders, 564 U.S. 135, 142 (2011), Defendants “must have actually exercised control over” a challenged statement in order for them to have “made” it and thus be held liable for such a statement. […] The Complaint contains no plausible allegation that Gautam Adani was involved in drafting, reviewing, or approving any document containing any alleged misstatement. Indeed, the SEC does not allege that Gautam Adani even knew these statements were being made. Although the Complaint alleges that the Adani Green Management Committee approved versions of the Offering Circular, the SEC fails to allege (because it cannot) that Gautam Adani attended the relevant meetings or approved the statements in the Offering Circular. Because there are no allegations tying him to any alleged misstatement, the SEC’s claims against Gautam Adani fail as a matter of law. […] And any argument that he had “ultimate authority” over the statements by virtue of his position with Adani Green similarly fails. […]
The allegations against Sagar Adani are also deficient. Even if “multiple drafts” of the Offering Circular “were provided to [him]”, these allegations do not tie him to specific misstatements, much less show that he had “ultimate authority” over their content.
For similar reasons, the SEC fails to state a claim under Rule 10b-5(a) and (c)’s scheme liability provisions. Under those provisions, Defendants must have “(1) committed a deceptive or manipulative act; (2) in furtherance of the alleged scheme to defraud; (3) with scienter.” […] In this Circuit, scheme liability requires the SEC to plead “something extra” beyond mere misstatements. […] Here, the SEC relies merely on misstatements. That fails. As this Court explained in Eden Alpha CI LLP v. Polished.com Inc., “where the core misconduct alleged is in fact a misstatement, it is improper to impose liability by designating the alleged fraud a manipulative device rather than a misstatement.” […]
The SEC also fails to adequately plead that Defendants acted with the requisite intent. Besides conclusory allegations, the SEC makes no plausible allegation that Defendants acted with knowledge or recklessness […] or aided and abetted any violation. Indeed, the SEC has not even sued the alleged primary violator, Adani Green. And the SEC’s negligence-based theories brought under Sections 17(a)(2) and (a)(3) fare no better. The SEC alleges no facts demonstrating that Defendants failed to use “the degree of care that a reasonably careful person would use under like circumstances” with respect to the Offering.”
