24040198-Satyam-Scam

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SATYAM SCAM

Presented By

Nimish Sharma-49

Mri

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Satyam

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Introduction

Satyam a leading global business and information

technology company, delivering consulting, systems

integration, and outsourcing solutions to clients in over

20 industries. Satyam Computer Services Ltd was founded in 1987 by

B.Ramalinga Raju.

The company offers information technology (IT) services

spanning various sectors, and is listed on the New York

Stock Exchange and Euronext.

Satyam's network covers 67 countries across six

continents.

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Contd.

The company employs 40,000 IT professionals across

development centers in India, the United States, the

United Kingdom, the United Arab Emirates, Canada,

Hungary, Singapore, Malaysia, China, Japan, Egypt and Australia.

It serves over 654 global companies, 185 of which are

Fortune 500 corporations.

Satyam has strategic technology and marketing alliances

with over 50 companies.

Apart from Hyderabad, it has development centers in

India at Bangalore, Chennai, Pune, Mumbai, Nagpur,

Delhi, Kolkata, Bhubaneswar, and Visakhapatnam.

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Just about 2 years ago, India's fourth-largest softwareservices exporter, Satyam Computer Services received aGolden Peacock Global Award from a group of Indiandirectors for excellence in corporate governance.

Ramalinga Raju himself was the recipient of many anaward for corporate governance and transparency

The fraud has brought to light the fact that in India the

distinction between owners and management is still notvery clear.

Where the owners are also the managers, such fraudsare always a possibility.

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Satyam is the biggest fraud in India's corporate history.

The company management, mainly disgraced chairmanB Ramalinga Raju, kept everyone -- seemingly -- in thedark for a decade and tarnished shining India's imagehorribly, is as stupefying a fact as the Rs 7,800 crore (Rs78 billion) scam itself.

The company's account books said that Satyam hadover Rs 5,000 crore (Rs 50 billion) in the bank, when itdid not. Raju said that he had been fudging the accountbooks for 'several years' and despite this no one but he,and his brother, knew of this.

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Satyam's auditors

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So what were the auditors,PricewaterhouseCoopers, doing? There was nocash with in the company's banks and yet the

auditors went ahead and signed on the balancesheets saying that the money was there.

Not just the cash, even they even signed off onthe non-existent interest that accrued on the

non-existent cash balance! The company officials said they relied on datafrom the reputed auditors.

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O ther company bigwigs

Satyam CFO Vadlamani Srinivas (R) being brought

to the Chanchalguda prison after his arrest in Hyderabad.

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T HESEBI

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The Securities and Exchange Board of India, which saysit is 'horrified at the magnitude of the fraud' had inDecember given a clean chit to Satyam saying that it hadnot found any violation of norms relating to takeover and

corporate governance in its preliminary surveillance of the deal involving the acquisition of Maytas Infra bySatyam Computer Services.

Thus there was no need for a formal investigation.Therefore, the probe would be limited to the deal

between the two listed entities -- Satyam and MaytasInfra -- and not cover the one involving Satyam andunlisted firm Maytas Properties.

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Analysts say the market watchdog lacks

the teeth for ensuring compliance ongovernance. Now, after so much water

has flown under the bridge, Sebi has

moved to 'take action' against the

company.

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T he bankers

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The company's bankers -- and it has a wholebunch of them, considering it is a huge company-- too have been shown in poor light.

Satyam's books showed cash to the tune of over Rs 5,300 crore (Rs 53 billion) in its banks.

Satyam's banks -- ICICI Bank, HDFC Bank,Bank of Baroda, etc -- were supposed to provide

bank statements on a quarterly basis and bankcertificates on basis of which auditors go aheadand signed the balance sheet.

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So, if the auditors were conned, it means thateither the bank statement and certificates wereforged or the auditors did not take anycognizance of the fact that bank statements

were showing one figure and the managementwas showing some other figure.

Now, banks are looking at options to stopsanctioning additional credit lines to thecompany and seek an auditor's explanation. Thebanks said they would not be affected muchfollowing the findings of fraudulent transactionsin Satyam's balance sheet.

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Directors and independent directors

Satyam Campus in Hyderabad

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The role of the company's directors, including independent directors,in the entire episode too has been exposed after the Satyamepisode.

Most of them essentially remain 'nodders' in the boardroom andagree to whatever the management or the promoters want to push

through. The Satyam board, including its five independent directors hadapproved the founder's proposal to buy 51 per cent stake in MaytasInfrastructure and all of Maytas Properties, owned by the familymembers of Satyam chairman B Ramalinga Raju.

Despite the shareholders not being taken into confidence, thedirectors went ahead with the management's decision.

The decision of acquisition was, however, reversed 12 hours later after investors dumped Satyam's stock and threatened actionagainst the management.

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Shareholders and the media

Kirit Somaiya, president, Investors' Grievances Forum, filed a case

against Satyam Computer Services in the Bomaby High Court

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Sometimes activism just does not help.

When Raju sought to push through the Maytas

deal without taking shareholders into

confidence, he was faced with huge protests.

The media, keen to help the underdog, too

joined in the protest. Raju was forced to cancel the deal.

In hindsight, it appears that it would have

perhaps saved Satyam if the deal had been

allowed to go through, as Satyam would havebeen able to use Maytas's assets to shore up its

own books.

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Raju, who showed artificial cash on his books,had planned to use this 'non-existent cash' toacquire the two Maytas (which is Satyam spelledin reverse) companies.

Since the Rajus held more than 36 percent stakein Maytas, it would have been easy to pushthrough the deal, at least from that side.

But with the shareholders and the mediaqueering the pitch, the deal fell through and nowso has Satyam.

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Investment banker DSP Merrill Lynch was appointed by Satyam tolook for a partner or buyer for the company a fortnight ago.

We now know that DSP Merrill terminated its engagement with thecompany soon after it found financial irregularities.

Merrill Lynch is also understood to have sent the information and thereason for their termination of the contract to the Bombay StockExchange, Sebi and even the New York Stock Exchange, on which

Satyam is listed.

However, despite the fact that DSP Merrill Lynch blew the whistle, itis not yet clear why it took such a long time to inform the authorities,and why it did not let the public know of Satyam's misdeeds.

DSP Merrill has not yet answered these questions.

Yet in the whole shady affair, DSP Merrill comes out the best partyas it was finally because of its move that Raju was forced to quit.

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Police stand guard outside the

Chanchalguda prison, where Satyam

ex-chairman Ramalinga Raju is being

held.

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The government, on its part, was perhaps

too busy projecting the stellar show of the

Indian IT sector and did not find it

necessary to launch an enquiry into these'complaints,' so to speak.

Thus by way of negligence the

government too is equally guilty in nothaving managed to save the shareholders,

the employees and some clients of the

company from losing heavily.

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P ooja, havan to help Raju get bail!

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Some ardent followers of B Ramalinga

Raju and some employees of Maytas are

invoking the Almighty to come to the aid of

the beleaguered IT strongman.

These fans conducted a prayer and havanservice to help the disgraced former

chairman of Satyam Computer Services

obtain bail. The prayers are being held so that Raju

comes out of this entire episode

unscathed.

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HDFC Bank chairman Deepak Parekh.

Satyam's new board meets, may elect chairman

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Satyam's three-member board constituted

by the government met for the first time on

Monday to discuss ways to get the IT

company back on track.

Eminent banker Deepak Parekh, IT expert

Kiran Karnik and former Sebi member C

Achuthan arrived at the Infocity campus of

Satyam in Hyderabad for the meeting, inwhich the chairman of the board is

expected to be elected.

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Bharat Kumar, lawyer of Ramalinga Raju, speaks to the

media outside Satyam's head office in Hyderabad.

Raju to be treated like ordinary prisoner

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Founder of Satyam Computer, B Ramalinga Raju, who

lived like a 'king' before admitting fudging of company

accounts to the tune of Rs 7,800 crore (Rs 78 billion),

slept on the floor of the Chanchalguda jail here like other

ordinary prisoners.

According to sources, the Raju brothers have been given

the status of 'C' class prisoners or undertrials.

The Raju brothers had to sleep on a mat on the ground

like all other prisoners.

They were offered the usual prison dinner of rice and

rasam, which the elder Raju refused, sources said.

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Satyam CFO Vadlamani in custody

CFO Vadlamani Srinivas (R) being brought to the Chanchalguda prison

after his arrest in Hyderabad.

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Ram Mynampati got more salary than Raju, directors!

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A prime prospect for probe by regulators and authorities

investigating the Satyam fraud, acting-CEO Ram

Mynampati appears to be the IT company's most valued

asset and drew a salary more than that of founder

Ramalinga Raju and all the directors put together. At the same time, its independent directors, many of

whom have quit Satyam board after the Maytas fiasco on

December 16, got at least Rs 1 lakh (Rs 100,000) a

month as commission and sitting fees. Mynampati, who is now being questioned by the team of

market regulator SEBI, got a total package of over Rs

3.5 crore (Rs 35 million) during the year ended March

2008, while founder and Chairman had to contend with

just about one fifth.

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A perusal of company documents reveals all the

directors, except Mynampati, got a total of Rs 2.6 crore

(Rs 26 million) as salary, commissions, sitting fees,

professional fees and other receivables.

What is surprising is the difference between the package

of Mynampati and all the others put together is about Rs

1 crore (Rs 10 million), almost the same that the second

best package that was given to independent Satyamdirector Krisha G Palepu.

After Mynampati the package for Ramalinga Raju totals

Rs 60.4 lakh (Rs 6.04 million), followed by his brother

Rama Raju at Rs 44.07 lakh (Rs 4.40 million). The company paid a total of Rs 1.56 crore (Rs 15.6

million) to its seven non-executive directors.

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Nasscom advises against

poaching Satyam's clients While welcoming the reconstitution of the

scam-tainted Satyam board, the Nasscom

chairman Ganesh Natrajan said the apex

body had advised its members to desist

from making "unsolicited offers" to the

customers of the beleagured company,

which has earned the dubious reputationof being 'India's Enron'.

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The IT industry in the country was "mature" enough to

resist such undesirable practices and poaching on the

customer base of Satyam, whose business continuity

needs to be ensured, he told PTI.

The government had taken the right steps in the matter

and Nasscom was hopeful that new board with proven

track record of its directors would restore credibility of

Satyam taking care of the liquidity aspect and

uninterrupted business schedules, Natrajan said. It was important to ensure that in the outsourcing,

customers did not lose their faith in Indian companies, he

stressed.

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The main trading floor of the New York Stock Exchange.

out a ozen awsu ts e

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out a ozen awsu ts e

against Satyam in US

About a dozen lawsuits have been filed against Satyam

Computer in US courts, charging the Indian IT firm with

duping thousands of American investors out of billions of

dollars.

Asked about the specific damages sought in the lawsuit,

law firm Vianale & Vianale LLP's counsel Keneth J

Vianale said that the sum duped could be in hundreds of

millions of dollars.

Vianale said in an emailed statement to PTI: "We havenot alleged a specific damages amount that we are

seeking. That will be a subject of expert testimony.

"However, in cases of this sort, it is not unusual for the

damages to be in the hundreds of millions of dollars."

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While two lawsuits were filed on January 7, the day

when Satyam's founder-chairman Ramalinga Raju

resigned after disclosing massive financial irregularities

to the tune of over a billion dollar, so far there has been

nearly a dozen lawsuits that have been filed against the

company.

Earlier, nearly six law firms including Brodsky & Smith

LLC, Glancy Binkow & Goldberg LLP, Harwood Feffer

LLP, Sarraf Gentile LLP, Vianale & Vianale LLP andIzard Nobel LLP had filed class action law suits against

Satyam Computer.

'G h ld S l '

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Abunch of worried employees

'Govt should protect Satyam employees'

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The Bharatiya Janata Party asked the Centre and

Andhra Pradesh government to take steps to protect the

interests of 53,000 employees and investors of the

scam-hit Satyam Computer.

"The government of India and Andhra Pradesh

government should take all steps to protect the interests

of investors and the company's employees," senior BJP

leader Venkaiah Naidu said on the sidelines of the BJP's

Youth Rally in Chennai.

ICAI asks PwC to explain Satyam account

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ICAI asks PwC to explain Satyam account

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The audit firm has maintained that it followed applicable audit

standards and went by audit evidence provided by the company.

The ICAI president said action against CAs, who audited the

accounts of Satyam Computer, can be expected in 2-3 months, if

found guilty. Jain said Satyam founder Ramalinga Raju's statement that only he

knew about the financial wrong-doings did not look like the whole

truth, as he did not write the accounts of his company.

Ramalinga Raju in a letter written to the company board admitted,

"...None of the board members, past or present, had any knowledge

of the situation in which the company is placed." Chartered

accountants body ICAI on Saturday served a showcause notice on

auditor PriceWaterhouse and asked it to submit balance sheets of

Satyam Computer audited by it in the last five years.

Over half a million people have stake in Satyam survival

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Over half-a-million people have stake in Satyam survival

KVK

amath, MD, ICICI Bank

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The big question on survival of Satyam Computer is

giving anxious moments not only to its over 50,000

employees but also to over half-a-million people, who

would get impacted indirectly if the IT firm does not come

out of the trouble, Confederation of Indian Industrypresident K V Kamath said on Saturday.

Kamath said each of over 50,000 Satyam employees

supports a family of four. "Every white collar job creates

four another jobs. (So) you are talking about anythingbetween half-a-million to a million people, who could

directly or indirectly have been impacted by this single

event," Kamath said.

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He said the crisis had such a social

magnitude that made the government act

swiftly and save the company.

Besides CII, Assocham and Ficci have

also welcomed disbanding of the Satyam

board of directors by the government.

They expressed hope that the move wouldhelp restore investor confidence not only

in Satyam but in corporate India in

general.

'AP govt not involved in Satyam scam'

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AP govt not involved in Satyam scam

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Andhra Pradesh government was in no way involved in

the massive accounting fraud at Satyam Computer,

State Finance Minister K Roasaih has said.

"The State government has nothing to do with the

Satyam Computer issue. The Centre was looking into

the issue," he told reporters in Vijayawada.

The minister was responding to Opposition parties'

charge that the Congress government was involved in

the scandal at the Hyderabad-based software firm.

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'No delay in Satyam probe'

The government said that there was no delay in acting

against the tainted founder of Satyam, B Ramalinga

Raju.

"There would be no laxity against the guilty... So let us

not talk about any individual or the auditors (PwC) of the

company," Minister for Corporate Affairs Prem Chand

Gupta told reporters when asked what action would be

taken against Raju and auditors.

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"We are very clear and a co-ordinated action

would be taken," he said.

The apex body of accounting firms Institutes of

Chartered Accountants in India has sought someinformation from the auditors of the company

and Financial Reporting Review Board, the

minister said, adding that they can ask for

working papers of the audit and that has alreadyhappened. "Once that (the papers) is received,

ICAI will take its view," he added.

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