DOJ Drops All Criminal Charges Against Compass Lexecon Client Gautam Adani in Securities Fraud Case

Adani Green Energy Ltd. (“Adani Green”) is a public limited company located in India that develops, builds, owns, operates, and maintains a portfolio of large solar power projects and wind farm projects. Gautam Adani formed Adani Green as well as Indian-domiciled, privately held, multinational conglomerate Adani Group and served on its board of directors. His nephew Sagar Adani is an executive of Adani Green.

The US Department of Justice (“DOJ”) indicted Mr. Adani and seven others for, among other things, securities fraud and securities fraud conspiracy. The DOJ alleged that these defendants bribed Indian state government officials to win contracts while simultaneously falsely touting the company’s compliance with antibribery principles and laws in connection with two bond offerings that were available for purchase by certain US investors. The United States Securities and Exchange Commission (“SEC”) sued Gautam and Sagar Adani alleging the same bribery and compliance-touting scheme in connection with one of the bond offerings.

Sullivan & Cromwell Co-Chair Robert J. Giuffra, Jr. retained Compass Lexecon and its affiliate, Professor Allen Ferrell, to analyze the economic evidence and determine whether it was consistent with the claims brought by the US authorities. Professor Ferrell issued a report concluding that there was no basis to the Government’s claims because: (1) the bond offerings were issued under Rule 144A, which only allows sales to “Qualified Institutional Buyers” purchasing on their own behalf who have the economic incentives, resources, and expertise to understand the risks of investing in securities issued by Indian companies; (2) the alleged misstatements are generic statements and are not the type that investors consider value-relevant; and (3) the bond price reactions to the relevant announcements did not support the Government’s claims.

After negotiations between counsel for Mr. Adani and the DOJ, which included the presentation of Professor Ferrell’s conclusions, the DOJ agreed to drop all criminal charges. Moreover, without admitting or denying the allegations, Mr. Adani entered into a proposed consent judgment with the SEC and agreed to pay $6 million. The Court that granted the motion to dismiss noted the defense’s expert reports and determined: “A court could find that the alleged misrepresentations are more akin to statements regarding compliance with general legal obligations than a specific set of criteria on which an investor would reasonably rely in deciding whether to purchase the securities. And the possibility of such a finding undermines the strength of the fraud charges.”

Professor Ferrell was supported by a Compass Lexecon team that included Michael Keable, Erin Smith, Ralph Scholten, Avisheh Mohsenin, and Shawn Chen.

Compass Lexecon worked closely with attorneys at Sullivan & Cromwell, including Robert J. Giuffra Jr., Nicolas Bourtin, Suhana S. Han, James M. McDonald, and Andrew J. DeFilippis, who successfully represented Mr. Adani.