India's biggest-ever corporate scandals

[omairhr]

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.

My guess is that Raju was too much leveraged in real estate and after the meltdown, he siphoned off money from Satyam to 'deleverage' himself and the strategy failed.

 

[omairhr]

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.

Here's a look at the board you are alleging to be involved:

The ones who quit:

Dr. Mangalam Srinivasan

Mangalam was involved in working with US Government Departments, US National Academy of Sciences and US National Science Foundation and the UN. She released a major publication on Technology Assessment and Development.

Vinod K. Dham

He has co-authored numerous technical papers and patents. Dham is also on the Boards of Newpath Ventures LLC, Hello Soft Inc., Sasken Communication Technologies Ltd., Nevis Networks Inc., Telsima Corporation, Insilica Inc., and Montalvo Systems.

Dr. Krishna G. Palepu

He teaches Finance, Control, and Strategy in Harvard's MBA and Executive Programs. His research focuses on analyzing firms' business strategies, and the process through which the effectiveness of these strategies is communicated to investors.

Dr. Mendu Rammohan Rao

Prof. M Rammohan Rao is the Dean of Indian School of Business (ISB).

The ones who are still there:

B. Ramalinga Raju
Ramalinga Raju, also known as Raju, is Satyam’s founder and chairman.

B. Rama Raju

Rama Raju, also known as Ramu, is Satyam’s co-founder and managing director.

Ram Mynampati

Ram Mynampati joined Satyam as executive vice president in 1999 and became executive vice president and chief operating officer in November 2000.

T. R. Prasad

T. R. Prasad holds a master’s degree in Physics (Electronics) from Banaras Hindu University. He is a lifetime fellow of the Institute of Engineers (FIE). He took over as Cabinet Secretary, Government of India, on 01.11.2000 and held this post for a two-year tenure after which he joined the 12th Finance Commission as a member.


Prof. V. S. Raju

He is the former Director of the Indian Institute of Technology, Delhi; and was a professor and Dean at the Indian Institute of Technology, Madras.


All in the Family
Satyam’s founder and chairman, Ramalinga Raju and B. Rama Raju, the co-founder are brothers and still on the board. Chairman Ramalinga Raju’s family holds 8.61 per cent through SRSR Holdings.

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It is interesting that the 'ones who resigned' were academics and i do not think that they had much time to oversee the direction of the company. They were added to the board for the sake of having 'celebrity' non-executive directors! The others were mostly family members.

The auditors of the company were PriceWaterhouseCoopers, a Big4 firm. If what Mr Raju said in his letter (Ramalinga Raju?s letter to the Board of Directors and SEBI | Share market guide, Learn stocks, IPO, bonds, money market and mutual funds) has any truth, the auditors should have discovered the scam years earlier!

 

[ejaz007]

In family run businesses auditors tend to do what the board/CEO/COO wishes them to do. No surprise there. Even if they knew they kept quite to keep the business.

 

[ahmeddsid]

This is Big, I know. My Big Big Country post was a joke, sad that many didnt notice it. Anyways Poor Jokes are my forte

The Indian Govt will bail Satyam out, thats for sure. But How, is the Question.

 

[ejaz007]

The bigger question is what is the regulatory authority doing? Its their job to keep an eye on the companies and what they are reporting.

 

[ahmeddsid]

I feel Raju is innocent, Its a story or one lie leading to another lie and finally culminating in a crime he had to do to keep the one lie covered up. I dont know, maybe I am wrong but its my feeling, my personal feeling.

 

[omairhr]

I feel Raju is innocent, Its a story or one lie leading to another lie and finally culminating in a crime he had to do to keep the one lie covered up. I dont know, maybe I am wrong but its my feeling, my personal feeling.

There have been a lot of suggestions that Raju had highly leveraged investments in real estates which backfired with the global meltdown this year.

The founding family had around 30% stake in the shares of the company and the pe ratio was about 20. This means that for every percent earnings 'added' to satyam's earning, there was a 20% increase in the equity value i.e. 6% increase for Raju and family which is huge considering the size of the company and the family's holding.

 

[omairhr]

In family run businesses auditors tend to do what the board/CEO/COO wishes them to do. No surprise there. Even if they knew they kept quite to keep the business.

It wasn't a mum-and-pop store. We're talking about billions of dollars! And huge amounts from Institutional investors also involved. These investors were the reason that Satyam could not go ahead with merging Maytas.

 

[omairhr]

There were 'red flags' being raised about Satyam for a long time now.

Cheques and balances by Sucheta Dalal - Indian Express

This is from 1999:

"Frankly, were I shareholder of Satyam I would worry about its propensity to pay so much more when it could have paid far less. It is difficult to say what should have been the right price for an Rs 1.3 crore turnover outfit with 20 people when the savviest investors around the world are buying into internet companies at incredible valuations with no profits in sight."