A global mining giant seeking public funds to develop one of the world’s largest coal mines in Australia has been accused of fraudulently siphoning hundreds of millions of dollars of borrowed money into overseas tax havens.
Indian conglomerate the Adani Group is expecting a legal decision in the “near future” in connection with allegations it inflated invoices for an electricity project in India to shift huge sums of money into offshore bank accounts.
Details of the alleged 15bn rupee (US$235m) fraud are contained in an Indian customs intelligence notice obtained by the Guardian, excerpts of which are published for the first time here.
The Directorate of Revenue Intelligence (DRI) file, compiled in 2014, maps out a complex money trail from India through South Korea and Dubai, and eventually to an offshore company in Mauritius allegedly controlled by Vinod Shantilal Adani, the older brother of the billionaire Adani Group chief executive, Gautam Adani.
Vinod Adani is the director of four companies proposing to build a railway line and expand a coal port attached to Queensland’s vast Carmichael mine project.
The proposed mine, which would be Australia’s largest, has been the source of years of intense controversy, legal challenges and protests over its possible environmental impact.
Expanding the coal port to accommodate the mine will require dredging an estimated 1.1m cubic metres of spoil near the Great Barrier Reef marine park. Coal from the mine will also produce annual emissions equivalent to those of Malaysia or Austria according to one study.
One of the few remaining hurdles for the Adani Group is to raise finance to build the mine as well as a railway line to transport coal from the site to a port at Abbot Point on the Queensland coast.
To finance the railway Adani hopes to persuade the Northern Australia Infrastructure Facility (Naif), an Australian government-backed investment fund, to loan the Adani Group or a related entity about US$700m (A$900m) in public money.
Adani family’s Australian corporate structure…..
Up to $3 billion from Adani's planned Carmichael coal mine will be shifted to a subsidiary owned in the Cayman Islands if the controversial project goes ahead, an analysis of company filings shows.
An "overarching royalty deed" gives a shell company rights to receive a $2-a-tonne payment, rising yearly by the inflation rate, beyond the first 400,000 tonnes mined in each production year for two decades.
The company with this entitlement is ultimately owned by Atulya Resources Limited, a secretive entity registered in the Cayman Islands, and controlled by the Adani family.
"In plain English, the upshot for the Adani family is [that] if the mine goes ahead, they receive a $2-a-tonne payment, so up to $3 billion, via a Cayman Islands company, a company owned in a tax haven," says Adam Walters, principal researcher and Energy Resource Insights.
With a production capacity of 60 million tonnes or more a year, that amounts to about $120 million per annum in payments, increasing each year in line with the CPI, potentially flowing offshore.
"I would describe it as a structure that means that the Adani family enriches themselves if the mine goes ahead but that other shareholders are impoverished," associate professor Thomas Clarke, director of the Centre for Corporate Governance at UTS told the ABC.
"The worry is that this may be just the beginning.
"That the Adani family have the ability to shift cash and assets around at will and in the future they may well do so at the cost of shareholders and the Queensland economy."
He said the billions flowing to the Adani private company would come at the expense of minority shareholders in the company listed on the Bombay stock exchange which ultimately owns the Carmichael mine.
How Adani acquired the right to this multi-billion-dollar revenue stream is a tale in itself.
In 2010, Adani Mining Pty Ltd bought the coal tenement that is set to become the Carmichael mine from the now defunct Linc Energy.
Part of the sale involved Adani Mining giving Linc Energy an "overriding royalty deed" which entitled it to receive $2-a-tonne for all coal mined beyond the first 400,000 tonnes in any production year.
Linc Energy informed investors at the time could be worth "over $120 million per annum" and up to $3 billion over the course of the royalty right.
But in August 2014, in dire financial straits, Linc Energy agreed to sell the royalty deed back to Adani at a fire sale price: just $150 million.
The obvious course would have been to extinguish the royalty deed, because it represented a multi-billion-dollar liability for the mine which is ultimately owned by Adani Enterprises Ltd, the Bombay-stock exchange listed company.
Instead, the royalty deed "was assigned by Linc Energy Limited to Carmichael Rail Network Pty Ltd as trustee for Carmichael Rail Network Trust," notes in financial reports of Adani Mining Pty Ltd say.
Carmichael Rail Network is one of a group of companies behind the proposed North Galilee Basin rail line, which Adani is currently seeking a subsidised loan of up to $1 billion from the Federal Government's Northern Australia Infrastructure Facility to build.
"What this means is that one of the companies currently seeking up to $1 billion in public subsidy is going to profit to the tune of up to $3 billion if the mine goes ahead," Mr Walters said.
Adani Mining Pty Ltd, the proponent of the Carmichael mine and the holder of its environmental approvals, appears to have lent Carmichael Rail the funds to buy the royalty deed.
BACKGROUND
We know that Abbott loves coal and thinks that it is “good for humanity”. Is that why he is prepared to back a financially risky project?
Is it the “10,000” jobs that government ministers say will come from the project (remembering that Adani’s own consultant has said that those numbers were vastly overblown and that Carmichael would result in less less than 1500 jobs).
Could it be the prospect of cash from coal royalties? Maybe.
Does the substantial media coverage from the mine just give the Abbott Government another opportunity to tell the public that all environmentalists are economic saboteurs who want to take away people’s jobs and come in the dead of night to steal your babies? Possibly.
But could there be another causal factor that has contributed to the way Australian politicians have forcefully backed Adani for so many years?
Could that other factor be the close relationships that the company has managed to forge at the highest levels with Australia’s political leaders?
Whenever an Australian leader sets foot in India, it seems that a meeting with Gautam Adani is never more than a figurative (and sometimes literal) flight in a private jet away.
There’s evidence of this going back at least as far as October 2010 and its there in the records of trade missions tabled before parliaments.
Let’s peruse together.
In October 2010, Queensland’s then Premier Anna Bligh travelled to India on a trade mission to promote the state’s bid to host the Commonwealth Games and “strengthen Queensland’s position as an ally and destination for future trade and investment in the eyes of the Indian market and nation leaders”.
A report tabled to the Queensland Parliament shows that Bligh’s first official meeting with Indian figures was with Adani, where the company’s owner Gautam Adani and his international development executive Harsh Mishra got to quiz the Premier about policies relating to rail lines, underground coal gasification and support for mining in the Galilee Basin.
Bligh also “agreed to attend the opening” of Adani’s offices in Brisbane later that month and extended an invitation for Adani to meet with its co-ordinator general when they were next in Brisbane.
After Campbell Newman won power for the Liberal National Party in Queensland, he led a trade mission to India too.
While there, Newman joined former Labor Resources Minister Martin Ferguson and a 76-strong business delegation for a tour of an Adani port and a power plant, reportedly getting there on a private jet.
The report on the trade mission, tabled to Parliament, shows that Mr Adani then hosted a lavish reception at his home for the entire delegation.
The event was part of “OzFest” – Australia’s “largest cultural festival” for which Adani was a “platinum sponsor”
Seeney’s delegation travelled with Adani executive Harsh Mishra to visit an Adani-owned port and power station before Seeney had a private lunch with the company.
Later that same day, Seeney met with Gujarat Chief Minister Narendra Modi (now the Indian Prime Minister) and… Gautum Adani.
Mr Adani then hosted a private dinner with Seeney “which included Adani Group senior executives and members of Mr Adani’s family”.
But it’s not only Queensland politicians who have sought out Adani company bosses while on missions to India.
Gautam Adani is also a co-chair of the Australia-India CEO Forum – an initiative of the Australian High Commission.
Trade minister Andrew Robb attended the last meeting in New Delhi. I don’t know if they had dinner (but if I was a betting man….)
