Canadian pension execs charged in India bribery scheme
US federal prosecutors have announced charges against three former employees of Caisse de dépôt et placement du Québec (CPDQ) over an alleged scheme to pay more than $250 million in bribes to Indian government officials aimed at securing and financing large state energy supply contracts.
“CDPQ is aware of charges filed in the US against certain former employees. Those employees were all terminated in 2023 and CDPQ is cooperating with US authorities. In light of the pending cases, we have no further comment at this time,” a spokesperson for CDPQ told AsianInvestor.
The charges, announced on November 21, list the three among 8 people allegedly involved in a wide-reaching bribery scandal involving Adani Group, a leading Indian conglomerate, and Azure Power, a renewables company.
CPDQ holds a 50% stake in Azure Power, while OMERS, another Canadian pension fund, owns 20%.
“The allegations in this indictment are concerning. The events alleged in the formal charges began before we became a minority shareholder in Azure Power in 2021. OMERS is not implicated in any of the alleged conduct and will continue to cooperate fully with the investigation,” an OMERS spokesperson told AsianInvestor:
Federal prosecutors, including US deputy assistant attorney-general Lisa Miller, noted that the alleged bribes to members of the Indian government occurred between 2020 and 2024.
These payments were not disclosed to investors and banks in the US, from which the companies have raised millions of dollars.
Adani Green Energy, majority-owned by the Adani Group, was also listed as a beneficiary of the alleged bribery scheme.
While the Group's founder Gautam Adani, Asia's second richest man, has been charged with securities law violations and faces potential fines, he has not been charged under the US Foreign Corrupt Practices Act, according to Adani Green Energy.
LONG SERVING
The CDPQ employees are former executives Cyril Cabanes, CDPQ’s long-serving managing director of infra for Asia Pacific and Middle East, Deepak Malhotra, director, infrastructure for South Asia, and Saurabh Agarwal, who was managing director of CDPQ India and managing director, infrastructure South Asia.
The three “knowingly and wilfully joined the conspiracy … [to] corruptly offer, authorise, promise to pay and pay bribes”, which was initiated in 2020 by executives at the Adani Group, according to the charges.
The charges allege the CDPQ employees obstructed a US government investigation into the bribes, agreeing to provide false information and deleting related emails.
A parallel civil lawsuit brought by the US Securities and Exchange Commission said the alleged bribes were paid in order to “secure [the Indian government’s] commitment to purchase energy at above-market rates that would benefit Adani Green and Azure Power”, two renewable energy companies in India.
INHERENT RISKS
Pension funds in Canada and Australia tend to assume higher levels of governance in markets such as India than actually exist, according to Peter Ryan-Kane, CEO and founder at investment consultancy PeRK Advisory.
PeRK Advisory
“They have gone to places they don’t fully understand, and more fundamentally, where they have applied the same rules and standards as [at home]. In places where there are not the same governance ethics things come unravelled," Ryan-Kane told AsianInvestor.
"Poor governance standards enable poor governance practice to flourish. Poor ethics are emboldened by poor governance. There is a tendency to assume that [home rules] apply everywhere. There is an element of naivety in this," he added.
François Dauphin, president and chief executive of the Institute for governance of private and public organisations, a Canadian think tank, said that, while significant improvements in investor governance had been made over the last few years, the Adani case highlighted their limitations.
Institute of governance
“This case demonstrates the difficulty of detecting from a distance an established system, a culture of collusion, bribery and corruption, especially when your own representatives are part of this system and help to protect it," Dauphin told AsianInvestor.
There is, however, a question of personal ethics on the part of the individuals involved, he added.
"On this aspect, there are probably lessons to be learned regarding the selection process of representatives who play a crucial role in preserving the assets and reputation of the institutional investors who mandate them."