Hyderabad July 25, 2009
Central Bureau of Investigation (CBI) sleuths, led by its director Ashwini Kumar, met senior officials of fraud-hit Satyam Computer Services, now rebranded as Mahindra Satyam, at its headquarters here on Friday.
“The CBI team was here to get first-hand information on the possible acquaintance of some staff with the company’s (jailed) founder, Ramalinga Raju. We don’t know further details of the closed-door meeting, as about 30 CBI security personnel cordoned off the entire office area. Several officials of the company, along with some senior management members, were present in the meeting,” a company source said.
He indicated the CBI team was likely to visit the IT outsourcing major’s headquarters again in a day or two. The CBI chief arrived here on Thursday to review the progress made by the bureau on its investigation into the multi-crore accounting fraud at Satyam.
Meanwhile, a petition filed by legal counsel for Ramalinga Raju yesterday, asking for quashing of the July 9 order of a lower court which allowed the CBI to conduct a lie detector test (polygraph test) and brain mapping (F300 testing) on Raju and his brother and former managing director B Rama Raju, and former chief financial officer Srinivas Vadlamani, all accused in the multi-crore scam, came up for hearing today.
Raju’s counsel contended the tests violated fundamental rights of the accused and would subject them to pressure. The confessions, anyway, would not be admissible in court. The CBI counsel sought time till July 27 from the court to file a reply. He told the court it would not conduct the tests till July 30. The CBI feels crores of rupees were also misappropriated from Satyam, for which they have yet to get proof. The accused, on whom the forensic tests were to be conducted, did not reveal the information with regard to the alleged defalcation and therefore, these were necessary to aid in the investigation.
The lower court felt it was a fit case to agree to allow the lie detector test and brain mapping.
Showing posts with label Matyas. Show all posts
Showing posts with label Matyas. Show all posts
Sunday, July 26, 2009
Saturday, June 6, 2009
Court reserves order on ED's plea in Satyam case
3 Jun 2009 PTI
HYDERABAD: A local court today reserved its orders for Friday on the Enforcement Directorate's petition, seeking permission to record the statements of the founder Satyam Computer B Ramalinga Raju and four other accused in the multi-crore rupee financial fraud case.
The XIV Chief Additional Metropolitan Magistrate Justice K Sudhakar after hearing the arguments posted his orders to June 5.
The Enforcement Directorate (ED) had filed a petition in the designated court of CBI on April 6 seeking its permission to record the statements of the accused in the jail to find out whether they have violated the Prevention of Money Laundering Act (PMLA).
The ED wanted to record the statements of Raju brothers, former CFO Vadlamani Srinivas and S Gopalakrishnan and Talluri Srinivas of Price Waterhouse.
Meanwhile, government examiner of questioned documents (GEQD), a central government forensic institute, today submitted its report in the court after verifying the signatures of the accused.
HYDERABAD: A local court today reserved its orders for Friday on the Enforcement Directorate's petition, seeking permission to record the statements of the founder Satyam Computer B Ramalinga Raju and four other accused in the multi-crore rupee financial fraud case.
The XIV Chief Additional Metropolitan Magistrate Justice K Sudhakar after hearing the arguments posted his orders to June 5.
The Enforcement Directorate (ED) had filed a petition in the designated court of CBI on April 6 seeking its permission to record the statements of the accused in the jail to find out whether they have violated the Prevention of Money Laundering Act (PMLA).
The ED wanted to record the statements of Raju brothers, former CFO Vadlamani Srinivas and S Gopalakrishnan and Talluri Srinivas of Price Waterhouse.
Meanwhile, government examiner of questioned documents (GEQD), a central government forensic institute, today submitted its report in the court after verifying the signatures of the accused.
Monday, April 20, 2009
Three Tech Mahindra executives may join Satyam board
20 Apr 2009
NEW DELHI: Three senior executives of Tech Mahindra are likely to be inducted in the Satyam board. The names doing the rounds are vice-chairman, MD & CEO Vineet Nayyar, president (international operations) CP Gurnani, and President (strategic initiatives) Sanjay Kalra.
Anand Mahindra, chairman of Tech Mahindra, who is in Hyderabad, is expected to address Satyam employees to provide them comfort amid concern that the new management may cut jobs.
Tech Mahindra will have its first official interaction with the Satyam board on Monday after obtaining the Company Law Board's approval for acquiring majority stake in troubled IT company.
Mahindra may also address all the vertical and process heads of Satyam and get an idea of the operations and business from the officials on the field.
"There is a board meeting on Monday. All Satyam directors and senior officials of Tech Mahindra will participate in the meeting to take stock of the situation," a Satyam Computer spokesperson said.
Tech Mahindra emerged as the highest bidder for majority stake in Satyam at Rs 58 a share in an auction held on last Monday. It has to pay Rs 1,756 crore by April 22, 2009 for 31% stake.
As per the bidding schedule, the payment of Rs 1,756 crore will ensure the ownership of Satyam to Tech Mahindra following which the Mumbai-based company has to acquire another 20% in an open offer to public.
NEW DELHI: Three senior executives of Tech Mahindra are likely to be inducted in the Satyam board. The names doing the rounds are vice-chairman, MD & CEO Vineet Nayyar, president (international operations) CP Gurnani, and President (strategic initiatives) Sanjay Kalra.
Anand Mahindra, chairman of Tech Mahindra, who is in Hyderabad, is expected to address Satyam employees to provide them comfort amid concern that the new management may cut jobs.
Tech Mahindra will have its first official interaction with the Satyam board on Monday after obtaining the Company Law Board's approval for acquiring majority stake in troubled IT company.
Mahindra may also address all the vertical and process heads of Satyam and get an idea of the operations and business from the officials on the field.
"There is a board meeting on Monday. All Satyam directors and senior officials of Tech Mahindra will participate in the meeting to take stock of the situation," a Satyam Computer spokesperson said.
Tech Mahindra emerged as the highest bidder for majority stake in Satyam at Rs 58 a share in an auction held on last Monday. It has to pay Rs 1,756 crore by April 22, 2009 for 31% stake.
As per the bidding schedule, the payment of Rs 1,756 crore will ensure the ownership of Satyam to Tech Mahindra following which the Mumbai-based company has to acquire another 20% in an open offer to public.
Thursday, April 9, 2009
Satyam scam: Ramalinga Raju and four other accused give specimen signatures
9 Apr 2009, ET Bureau
HYDERABAD: B Ramalinga Raju, the tainted founder of Satyam Computer Services and four other accused in the Rs 7000 crore scam at the IT firm, furnished their specimen signatures at a local court on Thursday.
The city court issued orders to obtain their specimen signatures based on a petition filed by the CBI. The investigating agency sought their signatures as it has proof that the accused forged documents at the beleaguered IT company to inflate accounts and boost revenues. The accused have been charge-sheeted for forgery, besides falsification of records, misappropriation of accounts and destruction of evidence.
Besides Ramalinga Raju, his brother Rama Raju, their former Chief Financial Officer Srinivas Vadhlamani and the two auditors of Price Waterhouse, S Gopalakrishnan and Srinivas Talluri furnished their specimen signatures in the local court today.
Each of them furnished fifty signatures at the court on Thursday. The Local court is expected to issue orders on the bail petitions of the PW auditors on Thursday afternoon.
Ramalinga Raju had in January this year confessed to cooking Satyam's books. He is in judicial custody with the other accused in the scam.
HYDERABAD: B Ramalinga Raju, the tainted founder of Satyam Computer Services and four other accused in the Rs 7000 crore scam at the IT firm, furnished their specimen signatures at a local court on Thursday.
The city court issued orders to obtain their specimen signatures based on a petition filed by the CBI. The investigating agency sought their signatures as it has proof that the accused forged documents at the beleaguered IT company to inflate accounts and boost revenues. The accused have been charge-sheeted for forgery, besides falsification of records, misappropriation of accounts and destruction of evidence.
Besides Ramalinga Raju, his brother Rama Raju, their former Chief Financial Officer Srinivas Vadhlamani and the two auditors of Price Waterhouse, S Gopalakrishnan and Srinivas Talluri furnished their specimen signatures in the local court today.
Each of them furnished fifty signatures at the court on Thursday. The Local court is expected to issue orders on the bail petitions of the PW auditors on Thursday afternoon.
Ramalinga Raju had in January this year confessed to cooking Satyam's books. He is in judicial custody with the other accused in the scam.
Sunday, April 5, 2009
Maytas Hill Projects' customers to get respite from board
Mar 28, 2009
Over 600 worried customers who bought flats and villas in the Maytas Hill County projects finally got some respite. Ved Jain––the government nominated Director of Maytas Properties––assured them that he will protect their interest. CNBC-TV18’s Vishwanath Pilla reports on what Ved Jain is proposing.
Also read: Maytas seeks extension of financial closure deadline
The government nominated Board Director Ved Jain met the customers of the Maytas Hill County Project and tried to ally the fears of over 600 customers. Maytas Hill County Project is a flagship real estate project promoted by Ramalinga Raju’s family’s real estate company––Maytas Properties. The Maytas Hill County Phase I consisted of 350 villas and 1,150 apartments.
It is known that after Raju’s confession all the construction activity got startled. So most of the customers paid to the tune of 90% of the money and they are yet to receive their flats and villas. Most of the customers got worried and they have represented their case before the Company Law Board. The Company Law Board appointed Ved Jain to take care of customers interest and Ved Jain proposed an escrow account which enables the customers to put in all the remaining receivables, which we learn are to the tune of Rs 104 crore that will enable the company to use that money only for the completion of the project. Ved Jain has also proposed a grievance committee and a project monitoring company to ensure that the project continues.
Ramalinga Raju was also there at that meet, told that the company still needs Rs 580 crore to complete the project and he also told that the company is still going ahead with its IT SEZ in the Maytas Hill County premises. He said that the company has already invested, already invested Rs 100 crore on it and it is perusing that project. On the whole Mr Ved jain tried to allay the fears but a lot of customers are still apprehensive. They want back their money and their confidence got eroded after Raju’s confession.
Over 600 worried customers who bought flats and villas in the Maytas Hill County projects finally got some respite. Ved Jain––the government nominated Director of Maytas Properties––assured them that he will protect their interest. CNBC-TV18’s Vishwanath Pilla reports on what Ved Jain is proposing.
Also read: Maytas seeks extension of financial closure deadline
The government nominated Board Director Ved Jain met the customers of the Maytas Hill County Project and tried to ally the fears of over 600 customers. Maytas Hill County Project is a flagship real estate project promoted by Ramalinga Raju’s family’s real estate company––Maytas Properties. The Maytas Hill County Phase I consisted of 350 villas and 1,150 apartments.
It is known that after Raju’s confession all the construction activity got startled. So most of the customers paid to the tune of 90% of the money and they are yet to receive their flats and villas. Most of the customers got worried and they have represented their case before the Company Law Board. The Company Law Board appointed Ved Jain to take care of customers interest and Ved Jain proposed an escrow account which enables the customers to put in all the remaining receivables, which we learn are to the tune of Rs 104 crore that will enable the company to use that money only for the completion of the project. Ved Jain has also proposed a grievance committee and a project monitoring company to ensure that the project continues.
Ramalinga Raju was also there at that meet, told that the company still needs Rs 580 crore to complete the project and he also told that the company is still going ahead with its IT SEZ in the Maytas Hill County premises. He said that the company has already invested, already invested Rs 100 crore on it and it is perusing that project. On the whole Mr Ved jain tried to allay the fears but a lot of customers are still apprehensive. They want back their money and their confidence got eroded after Raju’s confession.
Saturday, February 28, 2009
Govt ill-equipped to plead own case for Maytas boards takeover
27 Feb 2009, PTI
NEW DELHI: The Government, which is seeking to supersede the board of Maytas Properties and Maytas Infra, till now seems to have virtually failed to convince the CLB that they are involved in financial irregularities.
"You are at an interim stage...investigations are on. Bring more material evidence based on that," said CLB Chairman S Balasubramanian to the government on Friday during the hearing.
"Tell me incidences, how company is suffering? How they (directors) are not discharging their duties? How it has affected the public interest...?" he said after the government failed to substantiate its allegation by placing concrete evidence before the Board.
However, deputy directors of the Ministry of Corporate Affairs representing the government, kept saying they were seeking only interim relief and at this stage, "mere intention (of committing irregularities) needs to be established".
On this, the CLB chief said, "Show me material evidence. I want to see it before taking any decision. I have to follow principles of law and can't go merely on allegations."
The Government pleading was based on company's balance sheet, some prints taken from website of Maytas Infra and confession of fraud by Satyam's former Chairman B Ramalinga Raju. They tried to establish charges of fraud and diversion of company's money to group firms, associates' concerns, etc.
NEW DELHI: The Government, which is seeking to supersede the board of Maytas Properties and Maytas Infra, till now seems to have virtually failed to convince the CLB that they are involved in financial irregularities.
"You are at an interim stage...investigations are on. Bring more material evidence based on that," said CLB Chairman S Balasubramanian to the government on Friday during the hearing.
"Tell me incidences, how company is suffering? How they (directors) are not discharging their duties? How it has affected the public interest...?" he said after the government failed to substantiate its allegation by placing concrete evidence before the Board.
However, deputy directors of the Ministry of Corporate Affairs representing the government, kept saying they were seeking only interim relief and at this stage, "mere intention (of committing irregularities) needs to be established".
On this, the CLB chief said, "Show me material evidence. I want to see it before taking any decision. I have to follow principles of law and can't go merely on allegations."
The Government pleading was based on company's balance sheet, some prints taken from website of Maytas Infra and confession of fraud by Satyam's former Chairman B Ramalinga Raju. They tried to establish charges of fraud and diversion of company's money to group firms, associates' concerns, etc.
Monday, February 23, 2009
Satyam gets nod to select buyer
22 Feb 2009, ET Bureau
Satyam Computer Services on Thursday won approval to increase its capital base and rope in strategic investors, setting the stage for
keenly-contested auction critical to ensure the company’s survival.
The Company Law Board (CLB) permitted the scandal-hit software company to raise its authorised capital to Rs 280 crore from Rs 160 crore, and allowed it to induct a strategic investor through a competitive auction process.
Engineering major L&T, Mahindra group firm Tech Mahindra and BK Modi-owned Spice Group are some of the suitors that have declared their interest in Satyam. The government-appointed board of Satyam is considering the option to impose a lock-in clause while making a preferential allotment to the strategic investor.
This is aimed at discouraging frivolous bidders from buying into the software firm. One option is to have a three-year lock-in on 26% of the preferential allotment of equity shares to be made to a strategic investor. Once a timeframe is finalised, the board will submit the plan to the CLB and then to SEBI.
Satyam Computer Services on Thursday won approval to increase its capital base and rope in strategic investors, setting the stage for
keenly-contested auction critical to ensure the company’s survival.
The Company Law Board (CLB) permitted the scandal-hit software company to raise its authorised capital to Rs 280 crore from Rs 160 crore, and allowed it to induct a strategic investor through a competitive auction process.
Engineering major L&T, Mahindra group firm Tech Mahindra and BK Modi-owned Spice Group are some of the suitors that have declared their interest in Satyam. The government-appointed board of Satyam is considering the option to impose a lock-in clause while making a preferential allotment to the strategic investor.
This is aimed at discouraging frivolous bidders from buying into the software firm. One option is to have a three-year lock-in on 26% of the preferential allotment of equity shares to be made to a strategic investor. Once a timeframe is finalised, the board will submit the plan to the CLB and then to SEBI.
Wednesday, February 18, 2009
Centre to take over Maytas firms
February 18th, 2009
Feb. 17: The Centre, in a dramatic move, on Tuesday decided to take over Maytas Infra and Matyas Properties run by the sons of Mr B. Ramalinga Raju, the disgraced former chairman of Satyam Computers.
“We have moved the Company Law Board to remove the existing directors of these companies and to declare them as ineligible for appointment as directors in any other company,” said the corporate affairs minister, Mr Prem Chand Gupta.
The Centre has moved swiftly to take over the fir-ms after getting wind of a major scam brewing there. “We find a strong possibility that the affairs of Maytas Infra and Maytas Properties have been conducted by its present management with fraudulent intent and breach of trust to the stakeholders of the company,” said the minister, justifying the takeover.
He added that the persistent neglect of the board had badly affected of the business and operations of these two companies. “We needed some information to act,” he said, explaining the delay in the Centre’s action.
Mr Raju’s elder son, Mr Teja Raju, runs Maytas Infra while younger son, Mr Rama Raju Jr, manages Maytas Properties. The government now plans to nominate its own directors on the board and take over their reins.
At present, Maytas Infra has three directors — Mr B. Teja Raju, Dr R.P. Raju and B. Narasimha Rao — while three others, including chairman, Mr R.C. Sinha, Mr C.S. Bansal and Mr P.K. Madhav, quit last month.
Maytas Properties, which is a privately held company of the Raju family, has three directors — Mr B. Ramaraju, Mr B. Tejaraju and Mr Datla Gopala Krishnam Raju. The government has also asked CLB to prevent the directors of these two companies from selling or mortgaging assets owned or controlled by them without permission. The CLB will hear the government’s petition on February 24.
Maytas Infra, along with a few joint venture partners, is executing around 93 projects worth Rs 40,000-crore across India especially AP, Maharas-htra, Karnataka and Orissa.
Feb. 17: The Centre, in a dramatic move, on Tuesday decided to take over Maytas Infra and Matyas Properties run by the sons of Mr B. Ramalinga Raju, the disgraced former chairman of Satyam Computers.
“We have moved the Company Law Board to remove the existing directors of these companies and to declare them as ineligible for appointment as directors in any other company,” said the corporate affairs minister, Mr Prem Chand Gupta.
The Centre has moved swiftly to take over the fir-ms after getting wind of a major scam brewing there. “We find a strong possibility that the affairs of Maytas Infra and Maytas Properties have been conducted by its present management with fraudulent intent and breach of trust to the stakeholders of the company,” said the minister, justifying the takeover.
He added that the persistent neglect of the board had badly affected of the business and operations of these two companies. “We needed some information to act,” he said, explaining the delay in the Centre’s action.
Mr Raju’s elder son, Mr Teja Raju, runs Maytas Infra while younger son, Mr Rama Raju Jr, manages Maytas Properties. The government now plans to nominate its own directors on the board and take over their reins.
At present, Maytas Infra has three directors — Mr B. Teja Raju, Dr R.P. Raju and B. Narasimha Rao — while three others, including chairman, Mr R.C. Sinha, Mr C.S. Bansal and Mr P.K. Madhav, quit last month.
Maytas Properties, which is a privately held company of the Raju family, has three directors — Mr B. Ramaraju, Mr B. Tejaraju and Mr Datla Gopala Krishnam Raju. The government has also asked CLB to prevent the directors of these two companies from selling or mortgaging assets owned or controlled by them without permission. The CLB will hear the government’s petition on February 24.
Maytas Infra, along with a few joint venture partners, is executing around 93 projects worth Rs 40,000-crore across India especially AP, Maharas-htra, Karnataka and Orissa.
India Wants Maytas Directors Out Article
NEW DELHI -- The Indian government Tuesday said it has found possible fraud at Maytas Infra Ltd. and unlisted Maytas Properties Ltd., and that it has asked the country's Company Law Board to remove the two companies' directors.
"On the basis of the information available, the government finds a strong possibility that the affairs of Maytas Infra and Properties were conducted by its present management with fraudulent intent," Corporate Affairs Minister P.C. Gupta told reporters.
Both companies are controlled by the family of the founders of software exporter Satyam Computer Services Ltd., which is being probed for financial irregularities.
Mr. Gupta said that the government Tuesday asked the Company Law Board, or CLB, to nominate directors to the boards of the two companies.
The CLB -- an independent, quasi-judicial body -- will hear the matter Feb. 24., Mr. Gupta said.
Hyderabad-based Satyam was plunged into turmoil following revelations by founder B. Ramalinga Raju in early January that he had overstated profits over several years and created a fictitious cash balance of more than $1 billion.
Maytas Infra and Maytas Properties officials couldn't be immediately reached for comment.
"On the basis of the information available, the government finds a strong possibility that the affairs of Maytas Infra and Properties were conducted by its present management with fraudulent intent," Corporate Affairs Minister P.C. Gupta told reporters.
Both companies are controlled by the family of the founders of software exporter Satyam Computer Services Ltd., which is being probed for financial irregularities.
Mr. Gupta said that the government Tuesday asked the Company Law Board, or CLB, to nominate directors to the boards of the two companies.
The CLB -- an independent, quasi-judicial body -- will hear the matter Feb. 24., Mr. Gupta said.
Hyderabad-based Satyam was plunged into turmoil following revelations by founder B. Ramalinga Raju in early January that he had overstated profits over several years and created a fictitious cash balance of more than $1 billion.
Maytas Infra and Maytas Properties officials couldn't be immediately reached for comment.
Monday, February 16, 2009
Agencies nail fund diversion at Satyam
16 Feb 2009,
HYDERABAD: Investigating agencies probing the Satyam Computer Services scam have proof that money was diverted into Maytas Infra, Maytas Properties and various front companies linked to B Ramalinga Raju, the disgraced promoter of the software firm, and his family members.
Key agencies, including the Serious Frauds Investigation Office (SFIO), will soon assess the quantum of diversion, based on records seized from these firms.
SFIO's interrogation of Raju, his brother Rama Raju and former Satyam CFO Vadlamani Srinivas on Saturday and two auditors of Price Waterhouse on Sunday could provide clues on the modus operandi.
The investigating agency is understood to have questioned Raju and his brother Rama Raju on the mystery of the missing Rs 1,700 crore from the company's account in an overseas branch of a state-owned bank.
Raju's elder son Teja Raju runs Maytas Infra while his younger son, Rama Raju Jr, runs Maytas Properties. Besides this, Raju and his family also floated 350-odd front companies, mainly for land deals.
"Investigations show that the inter-corporate loans and investments made by Maytas Infrastructure and Maytas Properties far outstripped the limits laid down under the Companies Act, raising suspicion on diversion of funds to benefit the promoters' companies," said an official involved in the investigation.
Under the Companies Act, a firm needs shareholders' approval to make any loan or investment, give a guarantee or provide security beyond 60% of its paid-up capital and free reserves, or 100% of its free reserves, whichever is higher.
Maytas Properties had a paid-up capital of only Rs 5 lakh. However, in 2007-08, the firm made investments to the tune of Rs 90 crore and had loans and advances totalling Rs 419.63 crore. The company had also received funds through unsecured loans for around Rs 600 crore. It used the borrowed funds for inter-corporate investments and loans.
HYDERABAD: Investigating agencies probing the Satyam Computer Services scam have proof that money was diverted into Maytas Infra, Maytas Properties and various front companies linked to B Ramalinga Raju, the disgraced promoter of the software firm, and his family members.
Key agencies, including the Serious Frauds Investigation Office (SFIO), will soon assess the quantum of diversion, based on records seized from these firms.
SFIO's interrogation of Raju, his brother Rama Raju and former Satyam CFO Vadlamani Srinivas on Saturday and two auditors of Price Waterhouse on Sunday could provide clues on the modus operandi.
The investigating agency is understood to have questioned Raju and his brother Rama Raju on the mystery of the missing Rs 1,700 crore from the company's account in an overseas branch of a state-owned bank.
Raju's elder son Teja Raju runs Maytas Infra while his younger son, Rama Raju Jr, runs Maytas Properties. Besides this, Raju and his family also floated 350-odd front companies, mainly for land deals.
"Investigations show that the inter-corporate loans and investments made by Maytas Infrastructure and Maytas Properties far outstripped the limits laid down under the Companies Act, raising suspicion on diversion of funds to benefit the promoters' companies," said an official involved in the investigation.
Under the Companies Act, a firm needs shareholders' approval to make any loan or investment, give a guarantee or provide security beyond 60% of its paid-up capital and free reserves, or 100% of its free reserves, whichever is higher.
Maytas Properties had a paid-up capital of only Rs 5 lakh. However, in 2007-08, the firm made investments to the tune of Rs 90 crore and had loans and advances totalling Rs 419.63 crore. The company had also received funds through unsecured loans for around Rs 600 crore. It used the borrowed funds for inter-corporate investments and loans.
Saturday, February 14, 2009
Satyam scam: Anti-fraud cell officials interrogate Rajus
14 Feb 2009,
HYDERABAD: A 12-member team of the Serious Fraud Investigation Office (SFIO) saturday quizzed Satyam Computers founder B. Ramalinga Raju, his brother B. Rama Raju and former chief financial officer Vadlamani Srinivas in Chanchalguda jail here.
The SFIO officials grilled the accused throughout the day in the presence of their lawyers. The officials divided themselves into three teams and questioned the accused separately from 10 a.m. to 5 p.m.
The interrogators recorded the statements of the accused with regard to various aspects of Rs.70-bn (Rs.7,000-crore/$1.43-bn) fraud admitted by Ramalinga Raju Jan 7.
The SFIO team is believed to have questioned Ramalinga Raju about the fudging of accounts, insider trading, diversion of Satyam funds to over 300 companies floated by him and his family and the role played by other company officials in the fraud.
A city court had Friday allowed SFIO to question all the five accused in jail over two days. The team will question on Sunday two former auditors of Pricewaterhouse - S. Gopalakrishnan and Srinivas Talluri.
SFIO, a multidisciplinary organisation that investigates serious financial frauds, had sought 10 days to record the statements of the accused.
The interrogation by SFIO has come close on the heels of market regulator Securities and Exchange Board of India (SEBI) questioning the Raju brothers for three days in jail.
The SEBI officials grilled them Feb 4-6 following an interim order from the Supreme Court.
SEBI has also filed a petition, seeking permission to interrogate Vadlamani Srinivas and two former auditors.
Sixth Additional Chief Metropolitan Magistrate D. Ramakrishna has reserved his orders on SEBI petition and will give his order Feb 17.
HYDERABAD: A 12-member team of the Serious Fraud Investigation Office (SFIO) saturday quizzed Satyam Computers founder B. Ramalinga Raju, his brother B. Rama Raju and former chief financial officer Vadlamani Srinivas in Chanchalguda jail here.
The SFIO officials grilled the accused throughout the day in the presence of their lawyers. The officials divided themselves into three teams and questioned the accused separately from 10 a.m. to 5 p.m.
The interrogators recorded the statements of the accused with regard to various aspects of Rs.70-bn (Rs.7,000-crore/$1.43-bn) fraud admitted by Ramalinga Raju Jan 7.
The SFIO team is believed to have questioned Ramalinga Raju about the fudging of accounts, insider trading, diversion of Satyam funds to over 300 companies floated by him and his family and the role played by other company officials in the fraud.
A city court had Friday allowed SFIO to question all the five accused in jail over two days. The team will question on Sunday two former auditors of Pricewaterhouse - S. Gopalakrishnan and Srinivas Talluri.
SFIO, a multidisciplinary organisation that investigates serious financial frauds, had sought 10 days to record the statements of the accused.
The interrogation by SFIO has come close on the heels of market regulator Securities and Exchange Board of India (SEBI) questioning the Raju brothers for three days in jail.
The SEBI officials grilled them Feb 4-6 following an interim order from the Supreme Court.
SEBI has also filed a petition, seeking permission to interrogate Vadlamani Srinivas and two former auditors.
Sixth Additional Chief Metropolitan Magistrate D. Ramakrishna has reserved his orders on SEBI petition and will give his order Feb 17.
Friday, January 23, 2009
L&T, Essar approach Satyam
NEW DELHI: There seems to be light at the end of the tunnel for the fraud-ridden Satyam Computer Services with two leading corporates — Larsen & Toubro and Essar — showing interest in buying whole or part of the Hyderabad-based IT major, it is understood.
Without identifying the buyers, CII mentor and director on the Satyam board Tarun Das confirmed on Tuesday that there were buyout offers from domestic and foreign companies.
During the day, L&T chief A.M. Naik met Corporate Affairs Minister Prem Chand Gupta on the Satyam fiasco even as the Essar group submitted a proposal for buyout of the BPO arm of the crisis-hit IT company.
Both companies already have interest in Satyam. While L&T has recently bought a little over four per cent stake in the company, the engineering major is also into IT business through L&T Infotech. The Ruias-promoted Essar is also in IT-related business through its outsourcing firm, Aegis.
After his meeting with Mr. Gupta and Corporate Affairs Secretary Anurag Goel here, Mr. Naik merely expressed concern over L&T’s investment in Satyam and did not divulge further details. Apparently, L&T is willing to explore all available options to safeguard its interest and it is too early to take a final decision.
“No comments,” said an L&T spokesperson when he was asked about the company’s interest in Satyam. To a question whether the company was looking for a strategic fit in Satyam, he said: “We have a portfolio investment through L&T Capital.”
According to sources, Essar has submitted a proposal by way of expression of interest (EoI) in Satyam’s BPO business.
It is learnt the Satyam board could soon appoint investment bankers for advice on sale or merger.
“Satyam has enormous fixed assets, human resource and technology assets. So, it is a very strong company. The board has not yet discussed the issue of looking for a buyer... But I have to truthfully say, we have been approached by potential buyers,” Mr. Das said.
Asked if the prospective buyers were multinationals or big Indian IT companies, he said: “both.”
HDFC Chairman and Satyam board member Deepak Parekh had also said the merger option was always open.
Mr. Das said Satyam was focussed on keeping its business running and, in that context, the appointments of a CEO and a CFO “are high priorities for the board,” which is meeting for two days this week to thrash out all these issues.
Without identifying the buyers, CII mentor and director on the Satyam board Tarun Das confirmed on Tuesday that there were buyout offers from domestic and foreign companies.
During the day, L&T chief A.M. Naik met Corporate Affairs Minister Prem Chand Gupta on the Satyam fiasco even as the Essar group submitted a proposal for buyout of the BPO arm of the crisis-hit IT company.
Both companies already have interest in Satyam. While L&T has recently bought a little over four per cent stake in the company, the engineering major is also into IT business through L&T Infotech. The Ruias-promoted Essar is also in IT-related business through its outsourcing firm, Aegis.
After his meeting with Mr. Gupta and Corporate Affairs Secretary Anurag Goel here, Mr. Naik merely expressed concern over L&T’s investment in Satyam and did not divulge further details. Apparently, L&T is willing to explore all available options to safeguard its interest and it is too early to take a final decision.
“No comments,” said an L&T spokesperson when he was asked about the company’s interest in Satyam. To a question whether the company was looking for a strategic fit in Satyam, he said: “We have a portfolio investment through L&T Capital.”
According to sources, Essar has submitted a proposal by way of expression of interest (EoI) in Satyam’s BPO business.
It is learnt the Satyam board could soon appoint investment bankers for advice on sale or merger.
“Satyam has enormous fixed assets, human resource and technology assets. So, it is a very strong company. The board has not yet discussed the issue of looking for a buyer... But I have to truthfully say, we have been approached by potential buyers,” Mr. Das said.
Asked if the prospective buyers were multinationals or big Indian IT companies, he said: “both.”
HDFC Chairman and Satyam board member Deepak Parekh had also said the merger option was always open.
Mr. Das said Satyam was focussed on keeping its business running and, in that context, the appointments of a CEO and a CFO “are high priorities for the board,” which is meeting for two days this week to thrash out all these issues.
Thursday, January 15, 2009
India rejects Satyam bailout, putting pressure on shares
Reuters : January 16, 2009
HYDERABAD, India: The Indian government is not considering bailing out Satyam Computer Services, and the fraud-damaged outsourcing company may have to turn to banks, many of them state-run, if it needs funding.
Satyam shares slumped by a third Thursday after Kiran Karnik, one of the new Satyam board members appointed by the government, ruled out accepting government money, saying it would send the wrong signal.
The software services exporter has been battling for survival since its founder, B. Ramalinga Raju, resigned as chairman last week, saying profits had been falsified for years and $1 billion in cash and bank balances did not exist.
"The government at this stage is not looking at any direct support or bailout to the company," the economic affairs secretary, Ashok Chawla, told reporters.
The corporate affairs minister, Prem Chand Gupta, also said Satyam had not sought state aid.
"If they require funds, they will raise it from banks," Gupta told reporters in New Delhi.
Karnik told the Times of India in an interview that Satyam was a financially viable company and would make profits in a few months.
He said taking government money would "send a wrong signal," after media speculation that the state would have to pump cash into a company that had imploded in the country's biggest fraud scandal.
The Times of India said raising funds from equity partners and banks was the new board's priority to meet working capital and pay staff salaries. A board meeting will be held Saturday, said another new board member, Deepak Parekh.
Analysts said raising funds would not be easy until Satyam restates its financial account. Satyam has appointed new auditors to examine the full extent of the fraud, find out how much cash it really has and restate its financial results.
This "restatement will take anything between three and six months, and until this is done, any financial aid for the company from banks or financial institutions is unlikely," said Sudin Apte, head of India operations for the market researcher Forrester. "In that sense, the uncertainty for Satyam continues."
Satyam shares closed Thursday at 20.30 rupees, or 41.1 cents, down 32.2 percent, dragging down the main stock index by 3.45 percent. Satyam's market value has dived to about $275 million from more than $7 billion in mid-2008.
The Indian government appointed three more Satyam directors Thursday, bringing the new board's membership to six.
The directors named Thursday are Tarun Das of the Confederation of Indian Industry; T.N. Manoharan, a chartered accountant; and Suryakant Balkrishna Mainak of the Life Insurance Corp. of India.
HYDERABAD, India: The Indian government is not considering bailing out Satyam Computer Services, and the fraud-damaged outsourcing company may have to turn to banks, many of them state-run, if it needs funding.
Satyam shares slumped by a third Thursday after Kiran Karnik, one of the new Satyam board members appointed by the government, ruled out accepting government money, saying it would send the wrong signal.
The software services exporter has been battling for survival since its founder, B. Ramalinga Raju, resigned as chairman last week, saying profits had been falsified for years and $1 billion in cash and bank balances did not exist.
"The government at this stage is not looking at any direct support or bailout to the company," the economic affairs secretary, Ashok Chawla, told reporters.
The corporate affairs minister, Prem Chand Gupta, also said Satyam had not sought state aid.
"If they require funds, they will raise it from banks," Gupta told reporters in New Delhi.
Karnik told the Times of India in an interview that Satyam was a financially viable company and would make profits in a few months.
He said taking government money would "send a wrong signal," after media speculation that the state would have to pump cash into a company that had imploded in the country's biggest fraud scandal.
The Times of India said raising funds from equity partners and banks was the new board's priority to meet working capital and pay staff salaries. A board meeting will be held Saturday, said another new board member, Deepak Parekh.
Analysts said raising funds would not be easy until Satyam restates its financial account. Satyam has appointed new auditors to examine the full extent of the fraud, find out how much cash it really has and restate its financial results.
This "restatement will take anything between three and six months, and until this is done, any financial aid for the company from banks or financial institutions is unlikely," said Sudin Apte, head of India operations for the market researcher Forrester. "In that sense, the uncertainty for Satyam continues."
Satyam shares closed Thursday at 20.30 rupees, or 41.1 cents, down 32.2 percent, dragging down the main stock index by 3.45 percent. Satyam's market value has dived to about $275 million from more than $7 billion in mid-2008.
The Indian government appointed three more Satyam directors Thursday, bringing the new board's membership to six.
The directors named Thursday are Tarun Das of the Confederation of Indian Industry; T.N. Manoharan, a chartered accountant; and Suryakant Balkrishna Mainak of the Life Insurance Corp. of India.
Tuesday, January 13, 2009
Indian IT takes a further knock
Wednesday, 14 January 2009
Related Articles
PricewaterhouseCoopers offices searched in Satyam probe
What are these?
Outlook Recent events have dealt the Indian IT services sector, the subcontinent's biggest industrial success story of recent years, a triple whammy. First there was the meltdown in global financial services, the outsourcing sector's biggest single customer group. Then came the terrorist atrocities in Mumbai. Outsourcing relies heavily on regular, face-to-face contact between contractors. The deliberate targeting of foreigners by terrorists has made some US and European companies wary about the necessary travel to India. Even a year ago, it was virtually impossible to find a room for the night in Bangalore. Today, the hotels are virtually empty.
Then came news that Satyam Computer Services, the fourth largest player in India's oursourcing sector, has been cooking the books. If it is true that Ramalinga Raju, the former chief executive, had in recent months been sustaining the salary bill only by selling shares in the company, then Satyam may soon be out of business altogether, dealing a further hammer blow to an industry that depends vitally on confidence to win clients.
Companies that have become unduly reliant through outsourcing on Satyam's services could find themselves in serious trouble. Even a couple of days outage for these services can more than wipe out the cost benefits that companies derive from outsourcing. All over the developed world, companies will be re-examining security of supply from their outsourcing contractors.
Confidence in the industry's standards of corporate governance has been further damaged by news that the World Bank is blacklisting Wipro and others for allegedly providing "improper benefits" to bank staff to win contracts. Wipro's sins, which go back to 2000 when "family and friends" of World Bank officials were offered favourable treatment in a listing of shares, are of a less serious nature than Satyam's. The infringements took place at the height of the dotcom bubble when such practices were commonplace. Nonetheless, the World Bank's action all these years later in blacklisting Wipro will further undermine confidence in the sector.
All this is occurring against the backdrop of what may become a quite vicious protectionist backlash against outsourcing to the developing world as global economic activity contracts. As more companies bring services back in house because of fears about reliability, security and to protect domestic jobs, is the outsourcing phenomenon heading for the buffers?
In the short term, there may indeed be a quite severe correction, though there was scant evidence of it in final quarter figures from Infosys yesterday, which showed continued strong growth. Unfortunately, this is pretty unlikely to persist, notwithstanding the business Infosys expects to pick up from Satyam.
IT services are a classic "late-cycle" industry, in that spending on IT tends to survive unscathed until comparatively late in the downturn before plunging like everything else into the abyss. At the very least, recent levels of soaraway growth will abate sharply from here on in. Yet, once present corporate governance and recessionary woes are overcome, the longer-term outlook still looks good. Demographics alone should ensure the outsourcing phenomenon has got quite a bit of mileage left in it yet. An ageing population in Europe means growing reliance on the more youthful demographic profile of the developing world to perform back-office functions.
The strong euro ought further to enhance the competitive advantage enjoyed by India and other parts of the developing world on labour and other costs. For the time being, however, India's outsourcers will undoubtedly struggle.
Related Articles
PricewaterhouseCoopers offices searched in Satyam probe
What are these?
Outlook Recent events have dealt the Indian IT services sector, the subcontinent's biggest industrial success story of recent years, a triple whammy. First there was the meltdown in global financial services, the outsourcing sector's biggest single customer group. Then came the terrorist atrocities in Mumbai. Outsourcing relies heavily on regular, face-to-face contact between contractors. The deliberate targeting of foreigners by terrorists has made some US and European companies wary about the necessary travel to India. Even a year ago, it was virtually impossible to find a room for the night in Bangalore. Today, the hotels are virtually empty.
Then came news that Satyam Computer Services, the fourth largest player in India's oursourcing sector, has been cooking the books. If it is true that Ramalinga Raju, the former chief executive, had in recent months been sustaining the salary bill only by selling shares in the company, then Satyam may soon be out of business altogether, dealing a further hammer blow to an industry that depends vitally on confidence to win clients.
Companies that have become unduly reliant through outsourcing on Satyam's services could find themselves in serious trouble. Even a couple of days outage for these services can more than wipe out the cost benefits that companies derive from outsourcing. All over the developed world, companies will be re-examining security of supply from their outsourcing contractors.
Confidence in the industry's standards of corporate governance has been further damaged by news that the World Bank is blacklisting Wipro and others for allegedly providing "improper benefits" to bank staff to win contracts. Wipro's sins, which go back to 2000 when "family and friends" of World Bank officials were offered favourable treatment in a listing of shares, are of a less serious nature than Satyam's. The infringements took place at the height of the dotcom bubble when such practices were commonplace. Nonetheless, the World Bank's action all these years later in blacklisting Wipro will further undermine confidence in the sector.
All this is occurring against the backdrop of what may become a quite vicious protectionist backlash against outsourcing to the developing world as global economic activity contracts. As more companies bring services back in house because of fears about reliability, security and to protect domestic jobs, is the outsourcing phenomenon heading for the buffers?
In the short term, there may indeed be a quite severe correction, though there was scant evidence of it in final quarter figures from Infosys yesterday, which showed continued strong growth. Unfortunately, this is pretty unlikely to persist, notwithstanding the business Infosys expects to pick up from Satyam.
IT services are a classic "late-cycle" industry, in that spending on IT tends to survive unscathed until comparatively late in the downturn before plunging like everything else into the abyss. At the very least, recent levels of soaraway growth will abate sharply from here on in. Yet, once present corporate governance and recessionary woes are overcome, the longer-term outlook still looks good. Demographics alone should ensure the outsourcing phenomenon has got quite a bit of mileage left in it yet. An ageing population in Europe means growing reliance on the more youthful demographic profile of the developing world to perform back-office functions.
The strong euro ought further to enhance the competitive advantage enjoyed by India and other parts of the developing world on labour and other costs. For the time being, however, India's outsourcers will undoubtedly struggle.
Are Satyam’s shareholders paying the price of land?
The Satyam Computer Services Ltd saga has attracted comment that has chiefly focused on three angles: the ethical conduct of founder B. Ramalinga Raju; the negligence of the auditors, Price Waterhouse; and the role of independent directors. The whole discourse seems to be missing a critical link in the chain—politics.
It is interesting to note the almost deafening silence of the political establishment on this issue. Though the controversy began with Satyam’s 16 December announcement that it would buy two companies owned by Raju’s sons—a decision it killed in 12 hours—and snowballed into a scandal on 7 January, when Raju’s letter to the board of directors became public, the first reported statement by a politician came only on 10 January. PTI reported Bharatiya Janata Party leader L.K. Advani as saying in Ahmedabad that “the government needs to be alert on such frauds and should act fast to punish the guilty”.
The next statement came on 11 January, when CNN-IBN television channel reported that the Telugu Desam Party had demanded a white paper on the infrastructure projects the Andhra Pradesh state government awarded to Maytas Infra Ltd, one of the two companies Satyam had sought to buy.
Given the alacrity with which our political establishment raises a ruckus on every issue, it is surprising that there seemed to be no reaction from any political grouping for so long. One reason suggested is that all Andhra Pradesh political parties remained quiet to protect “Andhra pride”. This appeared to have some validity, given Raju’s strong Andhra cultural preferences. One former employee of an ex-Satyam group firm was quoted in this newspaper on 8 January as saying, “For Raju, family, caste and those who could speak Telugu came first. I am not saying he was not a professional, but other things being equal, he would look at things in that order.”
Land plays a key role in the Satyam saga. Both Maytas Infra and Maytas Properties Ltd dealt with land, one way or another. It has also been reported that the promoters of Satyam and of the Maytas firms had built up a massive land bank in and around Hyderabad. It has also been hinted that because Raju belonged to a farming family, he could never get over his fascination with land.
It defies imagination how one could acquire so much of such prime land without the involvement, or at least acquiescence, of political elements, given that land is a prime asset—politicians all over the world know this, and our politicians are certainly not an exception.
Maytas Infra won projects worth Rs14,000 crore in the last two years or so, including the Rs12,220 crore elevated metro rail project in Hyderabad and the Rs1,590 crore deep water port at Machilipatnam, as well as several irrigation, water supply and electrification projects. Consider the opinion of an established and recognized professional on the Hyderabad Metro Rail project—none other than E. Sreedharan, head of the Delhi Metro Rail Corp. Ltd (DMRC), which served as a project consultant to the Hyderabad Metro project. In September, Sreedharan wrote a letter to the Planning Commission expressing apprehensions about the project. He is reported to have written: “It is apparent that the build-operate-transfer operator has a hidden agenda, which appears to be to extend the metro network to large tracts of his private land holdings, so as to reap a windfall profit four-five times the land price.” Sreedharan further noted that the alignment of the metro lines was changed to ensure more profit to the bidders and that the contract “smelled like a political scam”. The only measures taken by the state government in response were to demand an unconditional apology from Sreedharan and remove DMRC as a project consultant. The Planning Commission said that Sreedharan’s concerns were misconceived.
Former chief minister N. Chandrababu Naidu presented Raju to the likes of former US president Bill Clinton as Andhra Pradesh’s “poster boy”. Current chief minister Y.S. Rajasekhara Reddy is no different. Political groupings of all shades have been beneficiaries of such frauds; without their support, frauds of this magnitude are impossible. Since these connections haven’t come to light as yet, politicians are playing it cool, making vague statements about government vigilance and prosecution.
The nexus between politics and business is vicious. Disciplining auditors and independent directors, important as they may be, is only scratching the surface. The real corrective measures lie elsewhere.
Courtesy
Jagdeep S. Chhokar is a former professor of organizational behaviour at the Indian Institute of Management,
Ahmedabad
It is interesting to note the almost deafening silence of the political establishment on this issue. Though the controversy began with Satyam’s 16 December announcement that it would buy two companies owned by Raju’s sons—a decision it killed in 12 hours—and snowballed into a scandal on 7 January, when Raju’s letter to the board of directors became public, the first reported statement by a politician came only on 10 January. PTI reported Bharatiya Janata Party leader L.K. Advani as saying in Ahmedabad that “the government needs to be alert on such frauds and should act fast to punish the guilty”.
The next statement came on 11 January, when CNN-IBN television channel reported that the Telugu Desam Party had demanded a white paper on the infrastructure projects the Andhra Pradesh state government awarded to Maytas Infra Ltd, one of the two companies Satyam had sought to buy.
Given the alacrity with which our political establishment raises a ruckus on every issue, it is surprising that there seemed to be no reaction from any political grouping for so long. One reason suggested is that all Andhra Pradesh political parties remained quiet to protect “Andhra pride”. This appeared to have some validity, given Raju’s strong Andhra cultural preferences. One former employee of an ex-Satyam group firm was quoted in this newspaper on 8 January as saying, “For Raju, family, caste and those who could speak Telugu came first. I am not saying he was not a professional, but other things being equal, he would look at things in that order.”
Land plays a key role in the Satyam saga. Both Maytas Infra and Maytas Properties Ltd dealt with land, one way or another. It has also been reported that the promoters of Satyam and of the Maytas firms had built up a massive land bank in and around Hyderabad. It has also been hinted that because Raju belonged to a farming family, he could never get over his fascination with land.
It defies imagination how one could acquire so much of such prime land without the involvement, or at least acquiescence, of political elements, given that land is a prime asset—politicians all over the world know this, and our politicians are certainly not an exception.
Maytas Infra won projects worth Rs14,000 crore in the last two years or so, including the Rs12,220 crore elevated metro rail project in Hyderabad and the Rs1,590 crore deep water port at Machilipatnam, as well as several irrigation, water supply and electrification projects. Consider the opinion of an established and recognized professional on the Hyderabad Metro Rail project—none other than E. Sreedharan, head of the Delhi Metro Rail Corp. Ltd (DMRC), which served as a project consultant to the Hyderabad Metro project. In September, Sreedharan wrote a letter to the Planning Commission expressing apprehensions about the project. He is reported to have written: “It is apparent that the build-operate-transfer operator has a hidden agenda, which appears to be to extend the metro network to large tracts of his private land holdings, so as to reap a windfall profit four-five times the land price.” Sreedharan further noted that the alignment of the metro lines was changed to ensure more profit to the bidders and that the contract “smelled like a political scam”. The only measures taken by the state government in response were to demand an unconditional apology from Sreedharan and remove DMRC as a project consultant. The Planning Commission said that Sreedharan’s concerns were misconceived.
Former chief minister N. Chandrababu Naidu presented Raju to the likes of former US president Bill Clinton as Andhra Pradesh’s “poster boy”. Current chief minister Y.S. Rajasekhara Reddy is no different. Political groupings of all shades have been beneficiaries of such frauds; without their support, frauds of this magnitude are impossible. Since these connections haven’t come to light as yet, politicians are playing it cool, making vague statements about government vigilance and prosecution.
The nexus between politics and business is vicious. Disciplining auditors and independent directors, important as they may be, is only scratching the surface. The real corrective measures lie elsewhere.
Courtesy
Jagdeep S. Chhokar is a former professor of organizational behaviour at the Indian Institute of Management,
Ahmedabad
Salvaging Satyam -An Open View
Is Satyam Computer Services Ltd, India’s fourth largest information technology company that specialises in business software and back-office services, too important to be allowed to fail? What kind of rescue does it need? Can India handle the truth coming out of companies like Satyam?
What a shame! Last September, the World Council on Corporate Governance awarded Satyam Computer Services the “Golden Peacock Global Award for Corporate Governance.” Now the company is in disgrace for fraudulent accounting practices, which actually began to be exposed when the World Bank banned the company for eight years from doing business with it because of the allegation that Satyam had installed spyware on the bank’s computers and indulged in other illegal behaviours.
Satyam huffed and puffed and demanded apologies from the Bank and threatened legal action. And now the revelation of fraud by the company’s storied chairman has begun to adversely affect the reputation of India’s entire outsourcing industry.
Corporate India has never been de-hyphenated from rest of the world and in fact depends and thrives on the goodwill of others. It has nothing but its reputation and therefore needs extreme vigilance. Just Imagine! PricewaterhouseCoopers, the company’s auditors, certified that the company was flush with cash (more than $1 billion) when actually it was scratching the bottom of the barrel.
Satyam was supposed to be like the shining company on a hill. But now it has turned out to be just like another fraudster and ranks with one of the worst American companies like WorldCom that went bust a few years ago. Ramalinga Raju, Satyam’s founder and former chairman, who has an MBA from Ohio University, should have known how corporate heads get chopped off in the United States. He should not have forgotten the fate of WorldCom.
In July 2005, the former chief executive, Bernard Ebbers, of WorldCom whose $11 billion fraud dumped the telecommunications company into bankruptcy, was sentenced to serve 25 years in prison. The former financial chief officer of the company, Scott Sullivan, who pleaded guilty and testified against his former boss, told the jury that he had warned Ebbers that accounting adjustments, creative accounting or cooking books could not be justified. Ebbers told him nevertheless that the company had to “hit the numbers,” and meet the financial and revenue targets. Ebbers of course blamed his underlings for the fraud, said to be one of the largest in the US corporate history. When WorldCom real earnings could not meet the forecast, Ebbers asked that the accounting department to “adjust the numbers.”
Corporate accounting department are notorious for spinelessness. Outside auditors want to retain their clients and sing the company’s song. Wall Street analysts and financial journalists (some of whom work as unpaid employees of big corporations rather than watchdogs of public interests) went along with the web of lies woven by WorldCom team until the whole edifice began to collapse in 2000; and the share price crashed. Ebbers’ personal fortune was also tied with WorldCom’s market share price and in order to keep it high, he raised analysts’ expectations.
One cannot get away with lies for too long, but sometimes the price a company and eventually the public pay is too high; and the damage to the reputation is irreparable. It seems Satyam was re-enacting the WorldCom old play.
Good corporate leadership is essential, but the news media and shareholders should not turn company founders and CEOs into national icons. Corporate leaders rise to power on the promise of raising profits, market values and corporate growth but they should be watched where they are taking the company. Boards of directors need to play a bigger role in the running of the companies and their interests should go beyond maximising profits. No one should be allowed to get away with excesses. What goes through the brilliant heads of these brilliant people that they begin to think of themselves as unbeatable once they sit on the top floor is beyond anyone’s comprehension. Riding a tiger by a circus man may be fun to watch but not when a company CEO does it.
India needs to pay attention to corporate governance which is unfortunately based on secrecy and authoritarianism, not on internal checks and balances. In contrast, democratic governance is based on a healthy distrust of people in power. The built-in checks and balances along with a free Press have kept politicians from abusing power by exposing them to public ridicule, threatening to impeach them or put them in jail. Presidents, state Governors and legislators have been disgraced because of their abuse of power.
Watch the unfolding American drama of political corruption in Illinois where Governor Rod Blagojevich was arrested (and let out on bail) on the charge that he tried to sell President-elect Barack Obama’s Senate seat to the highest bidder. He has been impeached by the Illinois House and faces trial in the state Senate.
The democratic system does not leave the functioning of the political system to the innate goodness of the people seeking power. Nor is good behaviour left to any kind of special education or training in ethics course work in schools or colleges.
The temptation of power or the compulsive need to maintain the company’s public reputation trumps everything else; so transparency and accountability are indispensable to corporate governance. That unfortunately is not the case with financial markets where most middle-class people, whether Americans, Indians or Chinese, are vested through their pensions and other retirement accounts.
Today, we live in a world where corporations influence and control most of our activities. We are at the mercy of transnational corporations like Satyam that employ thousands of highly educated people and are integrated globally with hundreds of other companies. Letting Satyam fail is not an option for India; nor is its nationalisation, though temporary takeover by the government to stabilise the company and restore global confidence may be essential. After all, no one has questioned the quality of products and services that Satyam provides to the corporate global. Its intellectual and technological foundation is strong.
But to avoid clockwork corporate scandals, India needs a culture of skepticism not corporate myth-making. The news media through its investigating reporting should assume the role of outside auditors.
Courtesy
N.D.Batra is professor of communications at Norwich University
What a shame! Last September, the World Council on Corporate Governance awarded Satyam Computer Services the “Golden Peacock Global Award for Corporate Governance.” Now the company is in disgrace for fraudulent accounting practices, which actually began to be exposed when the World Bank banned the company for eight years from doing business with it because of the allegation that Satyam had installed spyware on the bank’s computers and indulged in other illegal behaviours.
Satyam huffed and puffed and demanded apologies from the Bank and threatened legal action. And now the revelation of fraud by the company’s storied chairman has begun to adversely affect the reputation of India’s entire outsourcing industry.
Corporate India has never been de-hyphenated from rest of the world and in fact depends and thrives on the goodwill of others. It has nothing but its reputation and therefore needs extreme vigilance. Just Imagine! PricewaterhouseCoopers, the company’s auditors, certified that the company was flush with cash (more than $1 billion) when actually it was scratching the bottom of the barrel.
Satyam was supposed to be like the shining company on a hill. But now it has turned out to be just like another fraudster and ranks with one of the worst American companies like WorldCom that went bust a few years ago. Ramalinga Raju, Satyam’s founder and former chairman, who has an MBA from Ohio University, should have known how corporate heads get chopped off in the United States. He should not have forgotten the fate of WorldCom.
In July 2005, the former chief executive, Bernard Ebbers, of WorldCom whose $11 billion fraud dumped the telecommunications company into bankruptcy, was sentenced to serve 25 years in prison. The former financial chief officer of the company, Scott Sullivan, who pleaded guilty and testified against his former boss, told the jury that he had warned Ebbers that accounting adjustments, creative accounting or cooking books could not be justified. Ebbers told him nevertheless that the company had to “hit the numbers,” and meet the financial and revenue targets. Ebbers of course blamed his underlings for the fraud, said to be one of the largest in the US corporate history. When WorldCom real earnings could not meet the forecast, Ebbers asked that the accounting department to “adjust the numbers.”
Corporate accounting department are notorious for spinelessness. Outside auditors want to retain their clients and sing the company’s song. Wall Street analysts and financial journalists (some of whom work as unpaid employees of big corporations rather than watchdogs of public interests) went along with the web of lies woven by WorldCom team until the whole edifice began to collapse in 2000; and the share price crashed. Ebbers’ personal fortune was also tied with WorldCom’s market share price and in order to keep it high, he raised analysts’ expectations.
One cannot get away with lies for too long, but sometimes the price a company and eventually the public pay is too high; and the damage to the reputation is irreparable. It seems Satyam was re-enacting the WorldCom old play.
Good corporate leadership is essential, but the news media and shareholders should not turn company founders and CEOs into national icons. Corporate leaders rise to power on the promise of raising profits, market values and corporate growth but they should be watched where they are taking the company. Boards of directors need to play a bigger role in the running of the companies and their interests should go beyond maximising profits. No one should be allowed to get away with excesses. What goes through the brilliant heads of these brilliant people that they begin to think of themselves as unbeatable once they sit on the top floor is beyond anyone’s comprehension. Riding a tiger by a circus man may be fun to watch but not when a company CEO does it.
India needs to pay attention to corporate governance which is unfortunately based on secrecy and authoritarianism, not on internal checks and balances. In contrast, democratic governance is based on a healthy distrust of people in power. The built-in checks and balances along with a free Press have kept politicians from abusing power by exposing them to public ridicule, threatening to impeach them or put them in jail. Presidents, state Governors and legislators have been disgraced because of their abuse of power.
Watch the unfolding American drama of political corruption in Illinois where Governor Rod Blagojevich was arrested (and let out on bail) on the charge that he tried to sell President-elect Barack Obama’s Senate seat to the highest bidder. He has been impeached by the Illinois House and faces trial in the state Senate.
The democratic system does not leave the functioning of the political system to the innate goodness of the people seeking power. Nor is good behaviour left to any kind of special education or training in ethics course work in schools or colleges.
The temptation of power or the compulsive need to maintain the company’s public reputation trumps everything else; so transparency and accountability are indispensable to corporate governance. That unfortunately is not the case with financial markets where most middle-class people, whether Americans, Indians or Chinese, are vested through their pensions and other retirement accounts.
Today, we live in a world where corporations influence and control most of our activities. We are at the mercy of transnational corporations like Satyam that employ thousands of highly educated people and are integrated globally with hundreds of other companies. Letting Satyam fail is not an option for India; nor is its nationalisation, though temporary takeover by the government to stabilise the company and restore global confidence may be essential. After all, no one has questioned the quality of products and services that Satyam provides to the corporate global. Its intellectual and technological foundation is strong.
But to avoid clockwork corporate scandals, India needs a culture of skepticism not corporate myth-making. The news media through its investigating reporting should assume the role of outside auditors.
Courtesy
N.D.Batra is professor of communications at Norwich University
Monday, January 12, 2009
HIGHLIGHTS-Media conference of new Satyam board
HYDERABAD, India, Jan 12 - The new board of Indian outsourcer Satyam Computer (SATY.BO) (SAY.N), which has been hit by a financial scandal, spoke to the media in the southern city of Hyderabad on Monday after their first meeting.
The government dissolved Satyam's board and installed a new three-man board on Sunday as it rushed to contain a fallout from India's biggest corporate scandal, after its founder last week revealed massive accounting fraud and quit.
Following are comments by the new board members: Deepak Parekh, chairman of top mortgage firm Housing Development Finance Corp (HDFC.BO); Kiran Karnik, former president of technology industry group National Association of Software and Service Companies; and C. Achutan, a former official at regulator Securities and Exchange Board of India.
Unless noted, the following comments are by Parekh.
THE BOARD'S PRIORITY
"The top priority of the board is to restore confidence of the customers, employees, suppliers and the investors by ensuring business continuity."
"Given the enormity of the issue and the urgent attention required, the board will meet frequently for the next few months."
"We'd like to assure Satyam's customers that our immediate priority is to ensure sustainability of service with minimal disruptions."
The government dissolved Satyam's board and installed a new three-man board on Sunday as it rushed to contain a fallout from India's biggest corporate scandal, after its founder last week revealed massive accounting fraud and quit.
Following are comments by the new board members: Deepak Parekh, chairman of top mortgage firm Housing Development Finance Corp (HDFC.BO); Kiran Karnik, former president of technology industry group National Association of Software and Service Companies; and C. Achutan, a former official at regulator Securities and Exchange Board of India.
Unless noted, the following comments are by Parekh.
THE BOARD'S PRIORITY
"The top priority of the board is to restore confidence of the customers, employees, suppliers and the investors by ensuring business continuity."
"Given the enormity of the issue and the urgent attention required, the board will meet frequently for the next few months."
"We'd like to assure Satyam's customers that our immediate priority is to ensure sustainability of service with minimal disruptions."
Satyam -CFO Srinivas Vadlamani Confession
HYDERABAD: Satyam Computer Services CFO Srinivas Vadlamani on Monday blamed the firm's statutory auditors Pricewaterhouse Coopers and the disgraced New Satyam board members |
In his confessional statement to the police, Srinivas said the auditors never pointed out any "deficiencies" during their discussions. But the most startling revelation was that fixed deposits were unreal and fictitious which were managed with an understanding between the audit section and management.
"The bank deposits were handled directly by Raju and he was specifically asked not to look into it", Srinivas said. This was corroborated in Raju's confessional statement which said "myself and my brother used to take decisions and instruct our CFO to do as instructed". He admitted that the accounts were manipulated about seven years.
His confession is perhaps a pointer to the fact that the promoters could have forged bank documents to show fictitious deposits. This puts a question on the possible involvement of banks in the scam.
Those who should have a pretty clear idea by now are the software company's main bankers -- ICICI Bank, Bank of Baroda, BNP Paribas, Citibank, HDFC Bank and HSBC.
In the normal course, Satyam's statutory Auditor PricewaterhouseCoopers would have demanded certificates from banks attesting to the existence of money in the IT firm's accounts. Did the banks indeed certify that they had the money? Or were certificates forged and presented to PricewaterhouseCoopers?
Srinivas has pointed fingers at his assistant Rama Krishna who has been working him for about ten years. "Prior to quarterly board meetings Ramakrishna will prepare balance sheet with the assistance of his team with internal employees. I do not pay much attention to the details of that balance sheet.
On his part, Raju said "we wanted to show more income in the account to avoid others from involving in the company affairs and any other possible hostile takeover situation, and hence, manipulated the balance sheet to attract more business and show unavailable amount as available cash in hand", said Raju.
The police confession comes four days after Raju claimed that the account books of the software company were manipulated to make it look much bigger than it actually was. Raju, whose son runs Maytas Infra, said sales, profit and cash balances were inflated and that he had pledged his shares to raise some Rs 1,230 crore and keep the company running.
Raju, his younger brother B Rama Raju and V Srinivas are now under judicial custody at the Chanchalguda jail in Hyderabad. The hearing on their bail application was deferred till January 16. Multiple agencies including the market regulator SEBI and the Serious Fraud Investigation Office (SFIO) are scrutinizing the books of the scam-tainted firm. The SEBI team today sought the court's permission to question Raju.
The fact now is that Satyam has almost no cash in either it current or deposit accounts with banks. So the questions being raised are whether the money diverted into companies connected possibly with the Raju family. Were the deposits with banks used as security to enable loans for entities controlled by the Rajus?
In his confessional statement to the police, Srinivas said the auditors never pointed out any "deficiencies" during their discussions. But the most startling revelation was that fixed deposits were unreal and fictitious which were managed with an understanding between the audit section and management.
"The bank deposits were handled directly by Raju and he was specifically asked not to look into it", Srinivas said. This was corroborated in Raju's confessional statement which said "myself and my brother used to take decisions and instruct our CFO to do as instructed". He admitted that the accounts were manipulated about seven years.
His confession is perhaps a pointer to the fact that the promoters could have forged bank documents to show fictitious deposits. This puts a question on the possible involvement of banks in the scam.
Those who should have a pretty clear idea by now are the software company's main bankers -- ICICI Bank, Bank of Baroda, BNP Paribas, Citibank, HDFC Bank and HSBC.
In the normal course, Satyam's statutory Auditor PricewaterhouseCoopers would have demanded certificates from banks attesting to the existence of money in the IT firm's accounts. Did the banks indeed certify that they had the money? Or were certificates forged and presented to PricewaterhouseCoopers?
Srinivas has pointed fingers at his assistant Rama Krishna who has been working him for about ten years. "Prior to quarterly board meetings Ramakrishna will prepare balance sheet with the assistance of his team with internal employees. I do not pay much attention to the details of that balance sheet.
On his part, Raju said "we wanted to show more income in the account to avoid others from involving in the company affairs and any other possible hostile takeover situation, and hence, manipulated the balance sheet to attract more business and show unavailable amount as available cash in hand", said Raju.
The police confession comes four days after Raju claimed that the account books of the software company were manipulated to make it look much bigger than it actually was. Raju, whose son runs Maytas Infra, said sales, profit and cash balances were inflated and that he had pledged his shares to raise some Rs 1,230 crore and keep the company running.
Raju, his younger brother B Rama Raju and V Srinivas are now under judicial custody at the Chanchalguda jail in Hyderabad. The hearing on their bail application was deferred till January 16. Multiple agencies including the market regulator SEBI and the Serious Fraud Investigation Office (SFIO) are scrutinizing the books of the scam-tainted firm. The SEBI team today sought the court's permission to question Raju.
The fact now is that Satyam has almost no cash in either it current or deposit accounts with banks. So the questions being raised are whether the money diverted into companies connected possibly with the Raju family. Were the deposits with banks used as security to enable loans for entities controlled by the Rajus?
Sunday, January 11, 2009
Satyam -The Way Forward
With the government now taking over things it will be reassuring for Satyam customers, employees and stakeholders. These is assurance now of business continuity and this could eventually help the beleaguered company find a buyer. In fact, things look bright for a government assisted transaction like a Bear Stearns type of rescue where JP Morgan bought (assisted by the US government) the beleaguered investment bank for as low as $10 a share.
Alternately, post a thorough due diligence by government and auditors, Satyam could be broken up into pieces (BPO business, verticals, service lines et al) and sold to several buyers, like energy giant Enron was. "With the government taking over the board, we are advising our clients to stay put as the cost and time of transition is very large at the moment," says Avinash Vasishtha, CEO of Tholons.
There are three options before the government. According to Tholons, the best option is to stabilise Satyam and merge it with an indemnity against any financial liability with a bigger IT company.
However, even as the government would prefer a quick end to the current turmoil, there could be delays due to the sheer magnitude of the mess. Whichever way things go, experts agree that Satyam may not exist as a standalone entity for very long. With government support it will be easier, to begin with get cash to manage the operations of the cash starved company, reassure global clients and stakeholders and eventually find a buyer.
Courtesy -the Economic Times
Alternately, post a thorough due diligence by government and auditors, Satyam could be broken up into pieces (BPO business, verticals, service lines et al) and sold to several buyers, like energy giant Enron was. "With the government taking over the board, we are advising our clients to stay put as the cost and time of transition is very large at the moment," says Avinash Vasishtha, CEO of Tholons.
There are three options before the government. According to Tholons, the best option is to stabilise Satyam and merge it with an indemnity against any financial liability with a bigger IT company.
However, even as the government would prefer a quick end to the current turmoil, there could be delays due to the sheer magnitude of the mess. Whichever way things go, experts agree that Satyam may not exist as a standalone entity for very long. With government support it will be easier, to begin with get cash to manage the operations of the cash starved company, reassure global clients and stakeholders and eventually find a buyer.
Courtesy -the Economic Times
Rise and Fall of a Global Majaor -The story Untold
RISE and FALL of a Global Majaor
Back in the 1980s a young entrepreneur Ramalinga Raju started Satyam Spinning Mills. A keen observer of global markets, with a mind for new thinking, Raju read the growth potential of the information technology and the role India could play in it.
Without any background in IT but a strong belief that the 'spirit of entrepreneurship' is transferable across any field of endeavour Raju founded Satyam Computer Services on 24 June 1987. From 1987 till the damning revelation on 7 January 2008, the fairy tale, the saga continued along side the Indian IT growth story — complete with bagging the First Fortune 500 client, Deere & Co in 1991, listing on BSE, an IPO oversubscribed 17 times, later a NYSE listing, global accolades and awards.
The most prestigious being the now withdrawn, 'Golden Peacock Global Award for Excellence in Corporate Governance for 2008' from London based World Council For Corporate Governance, awarded as recently as 22 September 2008. And the company boasted contracts with such envious global customers like Microsoft, FIFA, GE, Nissan, Nestle,
But there were some indications of a fraud running even at least five years back. Many people who had worked or were invited to work for Satyam left in a short period of time. According to industry sources, a very senior consulting head was once offered a job as a CEO at one of the Satyam's subsidiaries. But the executive refused to join as he was not even being allowed to see the balance sheet of that subsidiary along with Satyam.
In another instance, a very senior executive in a finance role quit just within two months of joining Satyam. The executive is now working with a Mumbai based IT company.Says CFO of a top tier Indian IT company, "for competitive purposes when I used to analyse their balance sheet, large amount of money in current account did not make any sense. Perhaps it was being siphoned off to other businesses."
Similarly, in another instance a Kotak analyst had inquired in October, last year from Satyam CFO about the rationale behind keeping $500 million in current account from Satyam, which draws no interest. ETtoo had got a similar response in September, last year. A a senior executive who quit Satyam BPO who said that he had many a times asked Mr Raju to spend the excess cash assets to spend for attractive buyouts for the BPO, like Infosys and Wipro were doing, but it all fell on deaf ears.
Obviously Raju went from strength-to-strength revealing terrific quarter-on-quarter performance, often beating street expectations without anyone catching on to any wrongdoing.
Start of the Fall
Things peaked in August of 2008, when many top level officials of Satyam started resigning, rumoured to be on confrontation with Raju's vision for the company. For instance, the entire top team of Satyam BPO had resigned by October. Satyam executive management team also started getting rickety, with the resignations of top level officials like Shailesh Shah, head of strategy.
Inside sources say that many team members had confrontations with Mr Raju on missing attractive buyout propositions despite huge cash in hand. It was only later, that those individuals realised that the cash never existed. On December 16, 2008, around 6:30 pm, two hours post closing of the markets, then Satyam Chairman Raju announced a buyout of 100% stake in Maytas Properties and 51% in Maytas Infra, thus effectively making Satyam, a core real estate company from a core IT company overnight. The total outflow for both the acquisitions was a whopping $1.6 billion comprising of $1.3 billion for the 100% stake in Maytas Properties and $300 million for a 51% stake in Maytas Infra.
The buyout was met with severely negative reactions from the investors and shareholders, with many threatening to sell off entire stake in the company. This prompted a huge list of prospective buyers as share price of Satyam suddenly dropped. It's ADR on NYSE fell almost 54% the same day. Within 24 hours, Satyam made a U-turn. He said, "We have been surprised by the market reaction. In deference to the views expressed by many investors, we have decided to call off these acquisitions." The Rajus had lost Rs 3,400 crore in the day as share prices of Satyam plummeted.
THE FALL
The gameplan behind the takeover of Maytas was to fill the gap of cash reflected in the books but actually non-existent, by taking over his own company, with his sons running the show.
It back-fired. Board members Prof. Krishna G Palepu, non-executive director and Vinod K Dham, non-executive & independent director, Prof. Mendu Rammohan Rao, non-executive & independent director resigned from the Satyam board following the adverse public reactions to Raju's decision. The board members alleged that important facts were concealed from the board and thus they were misguided. Next came the confrontation, with the World Bank. On December 23, Satyam was barred from bagging or bidding for contracts with the World Bank for eight years for providing Bank staff with "improper benefits". The shares fell almost 14% to its lowest in four years.
Ramalinga Raju then spent his Christmas countering the allegations by World Bank. The company asked World Bank to immediately withdraw those statements and apologise to Satyam, which obviously the Bank never did. Meanwhile, Raju's share in the company fell from 8% to 5% making it an attractive bid target.
HOW THE LID WAS BLOWN?
Post the Maytas fiasco, DSP Merill Lynch was appointed to look into Satyam's books and possibly find it a suitor and soothe the shareholder outcry. On Tuesday, January 6, DSPML is reported to have met Sebi officials and told them about large scale accounting irregularities. It told the regulator that it was uncomfortable in handling the mandate.
It also submitted a letter to Sebi on the same. The night of January 6, was one of the most discomforting nights for Raju and his family. As day broke, at 9.45 am, before the opening of the markets, a letter was faxed to Sebi Chairman, the board of Satyam, BSE and NSE. Rest is history. In the letter Raju, admitted about an inflated (non-existent) cash and bank balance of Rs 5,040 crore, an over stated debtor position of Rs 490 crore (as against Rs 2651 reflected in the books) and a fake liability of Rs 1,230 crore.
Nasscom went into an immediate damage control due to the disclosures made by its past Chairman. Nasscom President Som Mittal said: "This is a stand-alone case of failure. We expressed shock at the disclosures made by Mr Ramalinga Raju."
Satyam was originally started as Satyam Constructions. In 1987, Ramalinga Raju with his botherin-law DVS Raju, founded Satyam Constructions. It was perhaps here that he inherited the construction and real industry balance sheet skills. Perhaps its Mr Raju's real estate genes that he tried to impregnate inside an IT setup that back fired.
Courtesy - The Economic Times
Back in the 1980s a young entrepreneur Ramalinga Raju started Satyam Spinning Mills. A keen observer of global markets, with a mind for new thinking, Raju read the growth potential of the information technology and the role India could play in it.
Without any background in IT but a strong belief that the 'spirit of entrepreneurship' is transferable across any field of endeavour Raju founded Satyam Computer Services on 24 June 1987. From 1987 till the damning revelation on 7 January 2008, the fairy tale, the saga continued along side the Indian IT growth story — complete with bagging the First Fortune 500 client, Deere & Co in 1991, listing on BSE, an IPO oversubscribed 17 times, later a NYSE listing, global accolades and awards.
The most prestigious being the now withdrawn, 'Golden Peacock Global Award for Excellence in Corporate Governance for 2008' from London based World Council For Corporate Governance, awarded as recently as 22 September 2008. And the company boasted contracts with such envious global customers like Microsoft, FIFA, GE, Nissan, Nestle,
But there were some indications of a fraud running even at least five years back. Many people who had worked or were invited to work for Satyam left in a short period of time. According to industry sources, a very senior consulting head was once offered a job as a CEO at one of the Satyam's subsidiaries. But the executive refused to join as he was not even being allowed to see the balance sheet of that subsidiary along with Satyam.
In another instance, a very senior executive in a finance role quit just within two months of joining Satyam. The executive is now working with a Mumbai based IT company.Says CFO of a top tier Indian IT company, "for competitive purposes when I used to analyse their balance sheet, large amount of money in current account did not make any sense. Perhaps it was being siphoned off to other businesses."
Similarly, in another instance a Kotak analyst had inquired in October, last year from Satyam CFO about the rationale behind keeping $500 million in current account from Satyam, which draws no interest. ETtoo had got a similar response in September, last year. A a senior executive who quit Satyam BPO who said that he had many a times asked Mr Raju to spend the excess cash assets to spend for attractive buyouts for the BPO, like Infosys and Wipro were doing, but it all fell on deaf ears.
Obviously Raju went from strength-to-strength revealing terrific quarter-on-quarter performance, often beating street expectations without anyone catching on to any wrongdoing.
Start of the Fall
Things peaked in August of 2008, when many top level officials of Satyam started resigning, rumoured to be on confrontation with Raju's vision for the company. For instance, the entire top team of Satyam BPO had resigned by October. Satyam executive management team also started getting rickety, with the resignations of top level officials like Shailesh Shah, head of strategy.
Inside sources say that many team members had confrontations with Mr Raju on missing attractive buyout propositions despite huge cash in hand. It was only later, that those individuals realised that the cash never existed. On December 16, 2008, around 6:30 pm, two hours post closing of the markets, then Satyam Chairman Raju announced a buyout of 100% stake in Maytas Properties and 51% in Maytas Infra, thus effectively making Satyam, a core real estate company from a core IT company overnight. The total outflow for both the acquisitions was a whopping $1.6 billion comprising of $1.3 billion for the 100% stake in Maytas Properties and $300 million for a 51% stake in Maytas Infra.
The buyout was met with severely negative reactions from the investors and shareholders, with many threatening to sell off entire stake in the company. This prompted a huge list of prospective buyers as share price of Satyam suddenly dropped. It's ADR on NYSE fell almost 54% the same day. Within 24 hours, Satyam made a U-turn. He said, "We have been surprised by the market reaction. In deference to the views expressed by many investors, we have decided to call off these acquisitions." The Rajus had lost Rs 3,400 crore in the day as share prices of Satyam plummeted.
THE FALL
The gameplan behind the takeover of Maytas was to fill the gap of cash reflected in the books but actually non-existent, by taking over his own company, with his sons running the show.
It back-fired. Board members Prof. Krishna G Palepu, non-executive director and Vinod K Dham, non-executive & independent director, Prof. Mendu Rammohan Rao, non-executive & independent director resigned from the Satyam board following the adverse public reactions to Raju's decision. The board members alleged that important facts were concealed from the board and thus they were misguided. Next came the confrontation, with the World Bank. On December 23, Satyam was barred from bagging or bidding for contracts with the World Bank for eight years for providing Bank staff with "improper benefits". The shares fell almost 14% to its lowest in four years.
Ramalinga Raju then spent his Christmas countering the allegations by World Bank. The company asked World Bank to immediately withdraw those statements and apologise to Satyam, which obviously the Bank never did. Meanwhile, Raju's share in the company fell from 8% to 5% making it an attractive bid target.
HOW THE LID WAS BLOWN?
Post the Maytas fiasco, DSP Merill Lynch was appointed to look into Satyam's books and possibly find it a suitor and soothe the shareholder outcry. On Tuesday, January 6, DSPML is reported to have met Sebi officials and told them about large scale accounting irregularities. It told the regulator that it was uncomfortable in handling the mandate.
It also submitted a letter to Sebi on the same. The night of January 6, was one of the most discomforting nights for Raju and his family. As day broke, at 9.45 am, before the opening of the markets, a letter was faxed to Sebi Chairman, the board of Satyam, BSE and NSE. Rest is history. In the letter Raju, admitted about an inflated (non-existent) cash and bank balance of Rs 5,040 crore, an over stated debtor position of Rs 490 crore (as against Rs 2651 reflected in the books) and a fake liability of Rs 1,230 crore.
Nasscom went into an immediate damage control due to the disclosures made by its past Chairman. Nasscom President Som Mittal said: "This is a stand-alone case of failure. We expressed shock at the disclosures made by Mr Ramalinga Raju."
Satyam was originally started as Satyam Constructions. In 1987, Ramalinga Raju with his botherin-law DVS Raju, founded Satyam Constructions. It was perhaps here that he inherited the construction and real industry balance sheet skills. Perhaps its Mr Raju's real estate genes that he tried to impregnate inside an IT setup that back fired.
Courtesy - The Economic Times
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