The lies of Satyam: What CBI missed

Apr 30 2009

The chargesheet filed by the Central Bureau of Investigation (CBI) is more a confirmation of B Ramalinga Raju’s confession letter than a detailed investigation into the scam. The Satyam founder’s claims have been vindicated. But the agency has failed to uncover any new information relating to the financial misappropriation in the Hyderabad-based software firm. The points which the CBI seems to have missed or chosen to ignore:

Fund diversion
The investigative agency has missed out several points that could have led to unearthing of the alleged fund diversion from Satyam. It has found the disgraced Satyam founder to be honest in his confession about inflating profits and cash balances, but the agency does not throw any light on what happened to the money obtained by the Rajus. This is more remarkable considering that the union minister for corporate affairs, Prem Chand Gupta had said that the Serious Fraud Investigation Office (SFIO) had found preliminary evidence of money diversion from Satyam’s coffers.

Maytas land bank
The CBI has not tracked the source of income with which Raju succeeded in building a 6,000-acre land bank. The aborted December 16 Satyam-Maytas deal had valued Maytas Properties’ land at Rs 6,000 crore. The deal had led to a chain of events that unravelled the biggest corporate fraud in India.

282 missing firms
The chargesheet says Raju had floated 327 front companies in the names of the members of his extended family. Of these, eight companies had raised Rs 1,744-crore loans from non-banking finance companies (NBFCs). If Raju had used eight companies to raise loans and 37 companies to lend to Satyam, what was the reason for floating the additional 282 companies? Strangely, the CBI seems to have ignored to elaborate on this point, merely saying that they were floated for agriculture business.

Interest and tax
Then, there is the issue of foreign depository receipts (FDR) deposit rates not being in sync with the interest received. For example, Satyam received interest of Rs 1.05 crore on fixed deposits of Rs 66 lakh during 2000-01. This works out to be a whopping 158 per cent per annum. Further, the tax deducted at source (TDS) for first quarter (Q1) of 2008 at Rs 169.50 crore against an FDR interest income of Rs 323.84 crore, works out to over 50 per cent, while the next quarter interest TDS is only Rs 30.50 crore on an interest income of Rs 375.45 crore. Obvious discrepancies which have no answers in the chargesheet.

Share sale
In his statement, Ramalinga Raju said neither he nor his family had sold any shares in the last eight years. The CBI contradicts this, saying “over the years, the promoters of the company have sold the shares in the open market and received huge amounts.” The listed details of share sale do not say what was sold and when. The total amount received has been given as Rs 715 crore. Yet in the section on the role of B Rama Raju, brother of Ramalinga Raju, the chargesheet says “out of the said Rs 715 crore in the year 1999-2000, he (Rama Raju) has received Rs 26.68 crore as gift from his family. Is Ramalinga right on this point too?
Ultimately, an apex investigating agency is expected to unravel details meticulously. The charge-sheet in several places is poorly drafted and in others glosses over obvious questions. Perhaps the agency needs to refocus its energies on the biggest scam in the country.