(Bloomberg) -- Gautam Adani, one of Asia’s top billionaires, is embroiled in an alleged bribery conspiracy and faces a firestorm of legal action from US to India, the most urgent of which could be a piling up of investor lawsuits, say lawyers.
With criminal charges or action by the Securities and Exchange Commission, it’s very common that, within hours sometimes, investor lawsuits start pouring in, said William Devaney, partner at international law firm Baker & McKenzie LLP and a former federal prosecutor.
“They tend to play out for years and often end up in settlements,” he added.
From Avon to Petroleo Brasileiro SA, or Petrobras, companies have paid from a few million dollars to as much as $3 billion to settle securities suits under the US Foreign Corrupt Practices Act that claim financial loss due to material misstatement or breach of fiduciary duties.
This and the civil action by SEC are likely to present more urgent liabilities for Adani than the criminal case.
For the criminal case to proceed, Adani, who has denied all the allegations, would have to appear in a New York courtroom voluntarily or be extradited with the Indian government’s cooperation.
Without that the criminal case goes on hold but the defendant (Adani) becomes a “prisoner of his own country,” as he can be arrested outside India on an Interpol red notice that typically follows such charges, Devaney said.
The SEC civil action can only result in monetary penalties and a ban on serving as officer or director of a US publicly traded company. There is also scope for a settlement.
The US cases could also spark investigations in India.
Irrespective of what the US authorities do, any Indian authority can investigate the matter if they so deem fit, said Sidharth Luthra, senior advocate and a former government lawyer.
In the past, cases filed under foreign corruption laws against Indian entities have generated prosecutions by the Central Bureau of Investigation, Luthra said. These include Xerox Modicorp and De-Nocil Crop Protection. A corruption conviction could result in jail time.
India’s securities regulator is also examining if Adani failed to make adequate disclosure of the US investigation against him. A violation of the disclosure rules can result in monetary penalties to board bans and restrictions on access to capital markets, depending on whether it was an omission or an effort to conceal. Here too a settlement is possible depending on the nature of the infraction.
According to lawyers including Devaney, the timing of Adani’s indictment suggests the US Department of Justice might have been racing the end of the Biden administration. The new Trump administration has the power to seek dismissal of these charges, he said in a nod to speculation that the Trump-Modi relationship may spare Adani the blushes.
But, even in a new administration, it would be extraordinary if these very serious charges which are now public just disappeared, Devaney said.
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