India's biggest-ever corporate scandals

[Cheetah786]

One of India's biggest-ever corporate scandals took a sensational new turn today when the chairman of Satyam, the IT services giant, admitted he had orchestrated a $1billion (£669 million) fraud, and resigned.

B. Ramalinga Raju, the founder and chairman of Satyam, which means "truth" in Sanskrit, said in a letter to the board that he had wildly inflated the company’s profitability for several years.

This resulted in 50.4 billion rupees ($1 billion) worth of "fictitious” cash on the company’s balance sheet at the end of September.

"It was like riding a tiger, not knowing when to get off without being eaten," Mr Raju said, describing how the fraud, which he claimed had begun as an effort to smooth over a minor accounting discrepancy, had "attained unmanageable proportions as the size of the company operations grew".

He added: "I am now prepared to subject myself to the laws of the land and face consequences thereof."

The Satyam scandal will further stoke concerns about the state of corporate governance in India. Overseas investors have already voiced fears that the country's regulators regularly fail to police improper behaviour.

CB Bhave, the chairman of the Securities and Exchange Board of India, the markets watchdog, said: "This event is a first of its kind in India. We have a lot to learn."

The company is listed in Mumbai and New York, and a US investigation could also follow. Under particular scrutiny will be the role of PricewaterhouseCoopers, Satyam's auditor.

Mr Raju has been facing a wave of investor hostility since December 16 when he announced that Satyam would spend $1.6 billion taking over two struggling property development businesses - Maytas Properties and Maytas Infra - that were owned largely by him and were run by his sons.

He was forced to drop the deal, which had been approved by the company's board, just hours later after India's usually sedate institutional investors stockholders threatened to derail the acquisition by any means possible.

Most shareholders had assumed that Mr Raju was attempting to plunder Satyam's cash pile. He has subsequently said the acquisitions were part of a last ditch plot "to fill [Satyam's] fictitious assets with real ones".

A week later, the World Bank said that it had blacklisted Satyam, India's fourth-biggest software-services provider, for eight years, alleging that improper benefits had been offered to the bank's employees.

Mr Raju insisted that he did not take "even one rupee/dollar from [Satyam] ... on account of the inflated results. However, analysts quickly dubbed the fraud he created "India's Enron" and suggested the fallout out would take months to settle.

Bhavtosh Vajpayee of CLSA, the brokerage, said: "The independence of the board was already in question, now the auditors' (PwC) complicity in what seems to be a multi-year mis-statement of financials will also be explored."

Satyam chairman resigns amid $1bn fraud - Times Online

 

[Cheetah786]

Where oh where is Zaheerkhan cant wait to hear what he has to say about this.

 

[Zaheerkhan]

Where oh where is Zaheerkhan cant wait to hear what he has to say about this.

No excuses Dude, this is India's biggest white collar scam. This guy is going to jail tomorrow..could get 7yrs in jail.

 

[ahmeddsid]

In Big Economies, Small Small things like these keep happening senorita ! lol (Inspired from DDLJ)

 

[roopesh]

In Big Economies, Small Small things like these keep happening senorita ! lol (Inspired from DDLJ)

This is not SMALL SMALL! A company with employee strength 55,000+.....this is a public traded company too...SHOULD kick the board to jail

 

[F.O.X]

In Big Economies, Small Small things like these keep happening senorita ! lol (Inspired from DDLJ)

Well here is My Small advice for you.

Some time small things cause a damage that great, that i cant be filled with many big thing.

i think you got my point.


Regards
Champ

 

[Zaheerkhan]

^^^ Yep, this is India's very own ENRON .

 

[roopesh]

^^^ Yep, this is India's very own ENRON .

MERA DHOKA MAHAN! Award to Sathyam

 

[Cheetah786]

In Big Economies, Small Small things like these keep happening senorita ! lol (Inspired from DDLJ)

yuk na shud dho shud.

we have zaheer khans twin here i take it your knowledge in business is extremely high.

 

[Cheetah786]

The Satyam scandal has shocked India.

It is being called India's Enron.

Many in the financial circles are dismayed that the biggest-ever corporate fraud in the country could have escaped unnoticed for so many years.

It has brought into question the levels of corporate governance in the country, and has cast an ugly shadow on the once shining image of Indian industry overseas.

Investors stunned

For the last couple of days outside the Bombay Stock Exchange, all anyone can talk about at the chai stalls and sandwich stores is how Ramalinga Raju, the former boss of Satyam Computers, managed to rack up a billion-dollar fraud right under their noses.

Investors in Indian shares were stunned by Mr Raju's revelation, in a letter to the stock exchange this Wednesday, when he confessed his wrongdoing and admitted that he had effectively cooked the books of his firm for the last several years.
Satyam's shares plummeted on the news by 75%, dragging down India's stock main market by 7%.

"I can't believe it," says investor Rajiv Gupta outside the stock market.

"It's very worrying, and it's happened at the worst possible time. Markets here were just started to look like they were recovering. But this news - it is very very bad."

Ashok Bakliwal, another investor, agrees:

"This will put the spotlight on Indian companies, and overseas investors will be wary of putting their money here without taking a good, hard look at the company's books."

"As if India wasn't going through enough of a bad time - now this? I really don't know what will happen next. How could a fraud of this magnitude take place and go unnoticed? "

What went wrong?

It's a question that everyone is asking.

The controversy has got many in corporate circles here wondering whether it was India's new found love affair with capitalism that led to Satyam's downfall.

It's a wake-up call

Chanda Kochar, joint managing director, ICICI Bank

In the letter to his shareholders, Mr Raju says that he was trying to cover up the losses at Satyam, and in doing so got caught up in a vicious cycle of lies and debts.

He says this attempt to hide the losses from investors and shareholders was like "riding a tiger, not knowing how to get off without being eaten".

According to Mr Raju's statement, about $1bn (£0.65bn), or 94% of the cash on the company's books, was made up - and analysts say it was the manipulation of the cash flow which could have been one reason why the deceit was undetected.

Many analysts also say that the chase for huge profits, and the desire to keep up with the break-neck speed of India's $50bn outsourcing industry's growth rates that may have been behind Mr Raju's motivation in fudging the accounts at his firm.

Disappeared

But trying to get any answers from Mr Raju since his confession letter is proving to be impossible - he has disappeared.
A company spokesperson has been quoted as saying that his whereabouts remain unclear for now.

At a company press conference on Thursday, the acting chief executive Ram Mynampati told journalists that he and other board members had no knowledge of the financial fraud and were hoping to get back to business as soon as possible.

"Our only aim at this time is to ensure that the business continues," Mr Mynampati says.

But it will be some time before it is business as usual for the troubled tech firm.

Indian media is reporting that financial regulators have despatched investigators to Hyderabad to launch a formal investigation into the case.

India's main stock exchanges have announced they are removing Satyam Computers from their indices as of January 12 because of the stunning revelations

Leading members of Indian industry have also expressed their shock and disappointment that such an audacious act of deception could take place.

Chanda Kochar, the joint managing director of ICICI Bank, one of India's biggest lenders, says she is shocked by the news.

"It's a wake-up call - but I would like to say that it's important to remember this is an isolated event and shouldn't be seen as a barometer for the general level of corporate governance in India," she says.

"But it is also important for us to monitor the auditors and the other players in this scandal, and for us to become a lot more careful."

Investor flight?

But caution alone may not be enough to convince international investors that Indian companies are serious about cleaning up their governance

Many of Satyam's customers were persuaded to get into business with the company because of Mr Raju's suave, professional image.

The Western educated MBA graduate was one of the poster boys of India's new economy.

But with his whereabouts unclear, and investigations continuing, the shock waves of this scandal will continue to damage the image of corporate India overseas.

BBC NEWS | Business | Satyam scandal shocks India

This big fraud and the board didnt no any thing about it i doubt that they were all in it including the accountants.

 

[rubyjackass]

I believe the whole board is involved. Also the accountants(obviously).
The company is managed by the family to the maximum extent. Even the low rung employees are from the same roots as the family. Everything was excellently in place for a fraud like this.

 

[Cheetah786]

I believe the whole board is involved. Also the accountants(obviously).
The company is managed by the family to the maximum extent. Even the low rung employees are from the same roots as the family. Everything was excellently in place for a fraud like this.

Worse part is average worker will pay the price as this jackass and others like him will disapear with billions.

 

[rubyjackass]

Worse part is average worker will pay the price as this jackass and others like him will disapear with billions.

The funniest part is that even this guy did not get anything out of it.
All his share was already mortgaged. The financiers already sold it.

 

[Zaheerkhan]

I believe the whole board is involved. Also the accountants(obviously).
The company is managed by the family to the maximum extent. Even the low rung employees are from the same roots as the family. Everything was excellently in place for a fraud like this.

Dayum ,U know the companies accountant is a British based company.

 

[Zaheerkhan]

Worse part is average worker will pay the price as this jackass and others like him will disapear with billions.

U know this guy has so much Real Estate in and around Hyderabad, that if all that property is sold, they can bail-out not just 1 Satyam, but they can bail out 5 Satyams.
Infact, lastyear the Naxals in Telengana has circulated a suggestion to the govt. saying that if every bit of Land this guy owned was sold, no poor farmer in Telengana would go land-less.

This guy was never actually interested in the software Business. He was always into Real-estate. He started a real estate company called MAYTAS, that is Satyam spelt in reverse. He wanted to sell all the software Business of Satyam altogether. He was afraid his lie would be caught. Hence he wanted to merge Satyam and Maytas, this was objected to by the investors and shareholders, calling this deal un-ethical. Hen knew he would be caught one-day or the other. It was a better deal for him to surrender in India, because since Satyam is also listed on the NYSE, if they found out, he would have been sentenced to 100yrs in prison. But, one thing is for sure, he has destroyed the reputation of Hyderabad.