Trump pauses parts of foreign corruption law; Adani stocks up

Trump pauses parts of foreign corruption law; Adani stocks up

Trump pauses parts of foreign corruption law; Adani stocks up ByPrashant Jha Feb 11, 2025 08:53 PM IST Share Via Copy Link Trump has ordered a review of the FCPA, potentially easing legal troubles for Gautam Adani and his group, indicted for bribery and fraud last year.

Washington: President Donald Trump has asked the US attorney general to not initiate any new cases and review all old cases under the Foreign Corrupt Practices Act (FCPA), possibly opening the door for a legal reprieve for billionaire tycoon Gautam Adani and the Adani Group that were indicted under the law in November last year.

Trump pauses parts of foreign corruption law; Adani stocks up

In an executive order issued on Monday, Trump said that FCPA was “systematically..stretched beyond proper bounds..and abused”. This harmed presidential power to conduct American foreign policy and meet foreign policy objectives by harming American business competitiveness, he added. For this reason, the President ordered the AG to come up with new guidelines under the act, and pursue only those cases based on these guidelines personally approved by the AG.

“Overexpansive and unpredictable FCPA enforcement against American citizens and businesses — by our own government — for routine business practices in other nations not only wastes limited prosecutorial resources that could be dedicated to preserving American freedoms, but actively harms American economic competitiveness and, therefore, national security,” the order said.

Even though the order is driven by the stated intent to give American companies more room to operate businesses elsewhere, it might also apply to other companies whose actions fall within the ambit of the act. This leaves the decision on whether to pursue the case against the Adani Group and eight of its senior executives, including Gautam Adani, under the discretionary authority of the US Department of Justice (DOJ).

Under the current administration, with DOJ widely expected to act as an adjunct of the president, the space to exercise this discretionary authority in effect rests with the political executive. On November 21, DOJ had indicted the Adani Group companies, its chief Gautam Adani and seven others for allegedly orchestrating a $265 million ( ₹2,029 crore) scheme to bribe Indian officials in order to secure green energy supply deals -- an act that invites provisions of FCPA.

With the presidential order coming two days before Prime Minister Narendra Modi lands in Washington DC for his first meeting with Trump in his second term, there is a possibility of the issue coming up in private discussions in the wider context of the need for other companies to compete with China and participate in projects such as the India-Middle East-Europe Economic Corridor. The Adani group is a major player in Israel, and, before the indictment, had a partnership with the US Development Finance Corporation for a port project in Sri Lanka.

Within hours of the executive order becoming public, shares of major Adani Group companies surged in Indian markets on Tuesday. Adani Enterprises, Adani Green and Adani Power rose as much as 4.5% on the Bombay Stock Exchange in early trading before losing some of those gains.

Laying out the rationale of his decision, Trump’s order said that US national security depended on US companies gaining strategic business advantages and elimination of excessive barriers to commerce outside. On this basis, Trump announced a policy of “enforcement discretion”, directing AG Pam Bondi to “review guidelines and enforcement actions” under the act in the next six months.

During this period, the order instructed the AG not to initiate new cases. The order also asked the AG to “review in detail all existing FCPA investigations or enforcement actions and take appropriate action with respect to such matters to restore proper bounds on FCPA enforcement and preserve Presidential foreign policy prerogatives”.

It instructed the AG to use this period — and go beyond six months if needed — to issue updated guidelines or policies to promote the President’s authority to conduct foreign policy. The order stated that FCPA “investigations and enforcement actions initiated or continued after the revised guidelines or policies” shall be on the basis of these new guidelines and must be “specifically authorised” by the AG.

The order also asked the AG to determine whether “additional actions, including remedial measures with respect to inappropriate past FCPA investigations and enforcement actions”, are warranted and take actions or recommend such actions to the President.

The executive order suggests that the case against Adani might be put on hold, and the resumption of prosecution will be contingent on the new guidelines and the AG’s decision. Even if the case isn’t closed immediately, the prospect of a settlement is seen to have increased.

On November 21, US prosecutors had charged the tycoon and his associates with securities fraud, wire fraud conspiracy and violating anti-corruption laws, sending the group’s stocks tumbling up to 23% and wiping out over ₹2 lakh crore ($27 billion) in market value.

The case revolves around charges of the group orchestrating bribes to Indian officials through a Mauritius-based company that traded on the New York Stock Exchange, and then fraudulently raising over $750 million in bond sales from US investors while hiding these bribes, breaking securities laws.

The Adani Group has strongly denied the allegations, calling them “baseless” and vowing to “seek all possible legal recourse”.

Essentially, the charges are multi-fold: orchestrating $265 million in bribes, violating US anti-corruption laws, and then fraudulently raising over $175 million in bond sales from US investors while hiding these bribes, breaking securities laws.

According to court documents, between 2020 and 2024, Adani executives and those from another company, Azure Power, collaborated to pay bribes to Indian government officials in five states — Andhra Pradesh, Odisha, Tamil Nadu, Chhattisgarh and Jammu & Kashmir — to obtain solar energy supply contracts projected to generate more than $2 billion in profits over 20 years.

Gautam Adani is among India’s richest and most powerful business leaders with an interest in sectors ranging from coal trading to renewables, ports to airports, power to defence, among others. Pro-government voices in India cast the Adani group as a national champion which has scaled up Indian infrastructure domestically and expanded Indian economic footprint internationally. But Opposition voices attribute the group’s growth to Adani’s perceived proximity with the political leadership, shared history in Gujarat and out of turn patronage and cite it as an example of “crony capitalism”.

The indictment triggered a political storm in Parliament and led to a logjam that lasted several days. This controversy came almost two years after US short-seller Hindenburg Research accused the group of improper use of offshore tax havens and stock manipulation -- charges that Adani denied.