THE SATYAM SCAM…
(RAJU NOT THE GENTLEMAN)
India’s Enron , the biggest corporate fraud of Indian History
Page 2…
The Satyam Timeline
Year 1987: Ramalinga Raju established Satyam Computer Services Ltd.
1991 : Satyam gets listed on the Bombay Stock Exchange, IPO oversubscriber 17 times.
2006: Revenues cross ‘$1 billion.’ Raju becomes chairman of Nasscom
2007: Raju named Ernst & Young Entrepreneur of the Year.
2008
September 23: Satyam awarded with Golden Peacock Award for Corporate Governance and Compliance.
December 16: Satyam Chairman Ramalinga Raju announces plan to buy Maytas Infra and Maytas Properties owned by his sons for $1.6 billion.
December 17: Raju does a U-turn because of negative investor reaction.
December 23: Satyam barred from business with the World Bank for 8 years for alleged malpractices in securing contracts. Shares fall to lowest in 4 years.
December 25 – Satyam asks World Bank to apologize.
December 26 – Board member Mangalam Srinivasan resigns followed by exits of members Vinod Dham, Krishna Palepu.
December 30 – One of Satyam’s largest investors says it could sell its stake.More suitors join in the fray to acquire Satyam.
2009
January 2: Satyam says its founder’s stake fell by a third to 5.13%.
January 6: Satyam’s i-bank DSPML meets Sebi, informs about accounting irregularitites.
January 7: Ramalinga Raju resigns, discloses a Rs 7000-crore accounting fraud in balance sheets about cash which never existed in the company.
January 8: Satyam’s bank Citibank freezes its 30 accounts. Interim CEO Ram Mynampati says company in severe cash crunch and may not be able to pay salaries. Satyam’s auditor PwC faces ire.
January 9: Ramalinga Raju and his younger brother B Rama Raju arrested by Police. Central Govt disbands Satyam board, to appoint its own 10 directors.
January 10: Satyam’s largest investor Lazard seeks a nomination board. SEBI grills Raju.
In the instant case, the auditors happen to be PricewaterhouseCoopers and it has failed on more than one count: not verifying cash balances which were shown as over Rs 5,000 crore but non-existent; an interest component of Rs 376 crore that never flowed into the company’s coffers; liabilities which were not reflected to the tune of Rs 1,230 crore and likewise an over-stated debtors position.
“Without the concurrence of auditors, no fraud, and that too of this magnitude, can be committed year after year. It remains to be seen how seriously the government will view this and bring about changes that would check auditing firms being hand-inglove with the companies,” an analyst said.
Sumeeth Kachwaha, managing partner of Kachwaha & Partners in Delhi, said not only Raju but dozens of others, including auditors and accountants, should be held accountable for signing false balance sheets.
“They should be charged for financial wrong-doing by instituting a special tribunal under Corporate Affairs and Ministry of Commerce,” he said.
Interestingly, the Satyam saga is similar to the Global Trust Bank, whose rise and fall was a story in itself. The edifice of GTB was built on falsified accounts in an attempt to shore up valuations.
The scandal surfaced when its then head Ramesh Gelli tried to diversify into insurance by making an honourable exit from the bank. But that did not happen and GTB was ultimately merged with the Oriental Bank of Commerce.
Even in the Global Trust Bank case, the auditors were none other than PricewaterhouseCoopers and the Reserve Bank of India had then imposed a ban on their auditing bank accounts.
What Ramalinga Raju attempted and failed is exactly the same. Whatever be his public pronouncements, the promoters tried to maintain a high valuation for the company and to ensure this the books were fudged.
Just as Gelli tried, he sought to wriggle himself out by moving into real estate and infrastructure by buying the two Maytas companies. When the deal was stalled, his fate was sealed.
The other interesting element in the story is that both these shares – GTB and Satyam – figured among the 10 scrips that were operated by Ketan Parekh (named as KP 10) in the infamous stock market scandal years ago.
The US Government had acted in the toughest possible manner when the Enron scandal was exposed, by imprisoning the CEO and also barring the auditing firm – Anderson and Co – from being in the business.
Whether a similar fate awaits Ramalinga Raju and his partners in the fraud remains to be seen.
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