The FCPA remains a critical tool in combating corruption in international business, but as the Adani case demonstrates, it also has the potential for misuse when applied selectively, raising questions about fairness and accountability in global business practices

New Delhi (ABC Live): The Adani Group, an influential conglomerate with diversified interests across energy, infrastructure, and green energy sectors, has long been a key player in global capital markets is facing heat after it was inducted by US enforcement agencies for violating the provisions of the Foreign Corrupt Practices Act (FCPA), 1977.

Understanding the Foreign Corrupt Practices Act (FCPA): A Legal Framework for International Business

Adani Group’s Use of Rule 144A Offerings

the Adani Group in Between 2020 and 2021, raised over $2 billion using Rule 144A of the Securities Act of 1933 through Goldman Sachs, JPMorgan Chase, and Citigroup, played key roles in facilitating these bond offerings. The funds raised were earmarked for the Group’s expansive infrastructure and green energy projects in India, which are a central part of its strategy to become a leading global player in these sectors.

However, allegations have recently surfaced regarding potential violations during this capital-raising process, particularly in relation to misrepresentation of financials, stock price manipulation, and failure to disclose related-party transactions through offshore entities. These allegations have led to scrutiny from U.S. authorities, including the FBI, and are currently being investigated under the Foreign Corrupt Practices Act (FCPA).

Enacted in 1977, the FCPA prohibits the bribery of foreign officials to obtain or retain business. It also mandates transparency in corporate financial reporting, ensuring that U.S. investors are not misled by fraudulent financial practices. While the FCPA is designed to combat corruption, critics have raised concerns about its selective enforcement, arguing that it is sometimes wielded as a geopolitical tool rather than strictly an anti-corruption mechanism.

In the context of Adani, the FBI’s investigation raises the following potential violations:

Offshore Transactions: The Adani Group allegedly used offshore shell companies to route funds, which could violate FCPA provisions if U.S. financial institutions or markets were involved. This could raise concerns regarding money laundering and financial misconduct.

Bribery and Corruption: While no direct allegations of bribery have been substantiated, the investigation is focusing on whether the Adani Group made improper payments to foreign officials to secure contracts. If found true, this would constitute a direct violation of the FCPA.

Failure to Disclose Related-Party Transactions: The Adani Group has been accused of failing to adequately disclose related-party transactions conducted through offshore entities, which is a potential violation of both U.S. and international corporate governance norms.

The FCPA’s Role and Potential Misuse

The investigation into the Adani Group highlights a broader concern regarding the FCPA’s misuse as a tool for geopolitical manoeuvring. Critics argue that the law has often been used to target foreign competitors, particularly when they pose a competitive threat to U.S. businesses. The timing of the investigation, coinciding with rising U.S.-India trade tensions, has led some to speculate that the scrutiny on Adani could be an attempt to weaken a major corporate player in India and influence India’s economic policies.

Key Criticisms of FCPA Enforcement

Targeting Foreign Competitors: Several high-profile FCPA cases, including investigations into Adani, have centered around foreign companies, raising concerns of bias and economic protectionism. Critics argue that the U.S. selectively enforces the FCPA to target companies that threaten American business interests.

Unequal Treatment of U.S. Firms: There is a perception that U.S. companies often receive more lenient treatment, resolving FCPA cases through settlements and avoiding the reputational damage that foreign entities like Adani may face. This unequal application of the law is seen by some as a sign of favouritism towards U.S. firms.

Economic Pressure Tactics: The FCPA investigation into Adani may be viewed as a way to influence global economic policies, particularly in sectors where the Group holds significant stakes, such as energy and infrastructure. By targeting Adani, the U.S. could potentially exert pressure on India’s policies, particularly those related to infrastructure development and green energy initiatives.

Case Studies of FCPA Misuse

Several high-profile FCPA cases have raised concerns over the selective application of the law. Examples include:

Siemens AG (2008): Siemens, a German multinational, paid over $1.6 billion in fines following bribery allegations. Critics argue that the U.S. used this case to undermine Siemens’ competitive position in global markets.

Airbus SE (2020): Airbus, the European aerospace giant, faced penalties exceeding $4 billion for bribery-related charges. This case was viewed by some as a strategic move to weaken European competitiveness in the aviation sector.

Petrobras (2018): The Brazilian oil company Petrobras settled for $1.78 billion over corruption allegations. The timing of the investigation coincided with U.S. energy interests in the region, leading some to view it as an attempt to assert U.S. dominance in South America’s energy sector.

Conclusion: Implications for Adani Group

The ongoing investigation into the Adani Group under the FCPA could have serious legal and financial implications. If U.S. authorities find that Adani violated the FCPA or U.S. securities laws, the Group could face substantial penalties, including fines and sanctions. The investigation also raises questions about the potential misuse of the FCPA as a geopolitical tool, as some critics argue that U.S. authorities are selectively targeting non-U.S. entities for economic or political gain.

The outcome of the investigation could significantly impact Adani’s future access to U.S. capital markets and its broader international business activities. If the allegations are proven true, the Group may face investor lawsuits, significant reputational damage, and regulatory consequences that could hinder its ability to continue growing in key sectors like energy, infrastructure, and green energy.

The FCPA remains a critical tool in combating corruption in international business, but as the Adani case demonstrates, it also has the potential for misuse when applied selectively, raising questions about fairness and accountability in global business practices.