The Satyam Scam

CHAPTER NO. 1 INTRODUCTION AND RESEARCH METHODOLOGY INTRODUCTION

This project is regarding the Satyam scam where Satyam Computer Services Ltd was in a total mess with the Former Satyam Chairman B Ramalinga Raju surrendering before the andhra pradesh police under sections 120B, 409, 420, 468, 471. Along with him his brother and the companies CFO was also arrested . Raju resigned from the Satyam board after admitting to cheating six million shareholders, some of whom have lost their entire life savings.. After being held in Hyderabad's Chanchalguda jail on charges including cheating, embezzlement and insider trading, Raju was granted bail on 18 August 2010. A botched acquisition attempt involving Maytas in December 2008 led to a plunge in the share price of Satyam. In January 2009, Raju indicated that Satyam's accounts had been falsified over a number of years. He admitted to an accounting dupery to the tune of 7000 crore rupees or 1.5 Billion US Dollars and resigned from the Satyam board on January 7, 2009. I started working on the project in the initial phases of July where my research was derived from various sources on the internet and print media. After the initial progress meets I began to chalk out a definite index and layout for the project under the guidance of Prof. Arun Pujari. I collected a lot of information from many primary and secondary sources of information, like information from various reports, internet, articles from journals that spoke about the recent happenings related to the scam, which is known as one of the biggest scams in the history of the Indian Information Technology Industry. In my study I have tried to include various aspects relating to the scam which are the scams effects, the issue of corporate governance, arrest of the auditors etc. I also daily read the newspapers and magazines to keep myself updated with the latest happenings regarding the scam like the court proceedings, the formation of Mahindra Satyam and its new management . After I had completed my work on the research for the project I began work on preparing The case study regarding the Satyam Scam. After all my information was ready with the case study I started assembling all the information into a report systematically and I completed the project in due time.

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The Satyam Scam

Objectives of the Study

To find information and know about SATYAM COMPUTER SERVICES LTD. To know about the scam and its after effects like the Impact on the Indian I.T. Industry, the fall in

Satyams share prices, the Indian governments steps to save Satyam, formation of Mahindra Satyam and its new management. To know about PricewaterhouseCoopers (Satyams auditors), their role in the scam and to know

about the Satyam-Maytas deal: A mockery of Corporate Governance.

Research Methodology
There are different methodologies followed in a research study. The method used in this project is a Case Study Analysis.

Research Limitations
The first limitation was the time constraint,due to the lack of time in hand, getting all the information was difficult. Secondly there may be a possibility of an error or bias present in the second or first hand

information available.

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The Satyam Scam

CHAPTER NO. 2 SATYAM COMPUTER SERVICES LTD. SATYAM

Satyam Computer Services Limited is a leading global consulting and IT services company spanning 55 countries. It was established by Mr. B. Ramalinga Raju and B. Rama Raju on 24 June 1987. Satyam Computer Services Ltd is one of the leading global consulting and IT services company that offers end-to-end IT solutions for a range of key verticals and horizontals. Satyam Computers has domain expertise in verticals such as Automotive , Banking and Financial Service, Insurance and Healthcare, Manufacturing, Telecom, Infrastructure, Media, Entertainment, and Semi-conductors. Satyam today has nearly 40,000 employees on its rolls, working in development centers in India, the USA, the UK, the UAE, Canada, Hungary, Singapore, Malaysia, China, Japan and Australia. Satyam Computers' network is spread over 55 countries across 6 continents. Satyam serves over five hundred and fifty eight corporations world over including over one sixty three Fortune five hundred corporations. Satyam Computers was founded in June 1977 as a private limited company by Ramalinga Raju along with one of his brothers-in-law, DVS Raju. In June 1991, Satyam Computers got its first Fortune 500 Client. In the same year in August, Satyam Computers was recognized as a Public Limited Company. Satyam went public in May 1992 and its issue was oversubscribed 17 times. In July 1993, Satyam entered into a joint venture with Dun & Bradstreet. - On January 26th a joint venture company called Dun & Bradstreet Satyam Software (P) Ltd. was incorporated. In 1995 During the year company issued 37,17,000 12% unsecured fully convertible debentures part A of Rs.100 each on right basis for the shareholders in proportion of 1 FCD for every 5 share held. The company also issued 37,17,00012% FCD's-part `B' Rs.60 per debentures in August which can be converted intoequity shares of Rs.10 each at premium of Rs.50 per share on August 1996. Satyam was awarded ISO 9001 Certification in March 1995. In December 1995, Satyam Infoway was incorporated. In May 1997, Satyam became the first Indian IT Company to get ITAA Certification for Y2K Solutions. In November 1998, Satyam became one of the first companies to enter Indian Internet service market with the launch of Satyam Infoway's ISP Service. In the same year Satyam entered into a joint venture with GE. In 1999, Satyam Infoway became the first Indian Internet company to be listed on NASDAQ. In February 2000 Satyam was declared one of '100 Most Pioneering Technology Companies' by World Economic Forum, Davos. In May 2000 Satyam became the first organization in the world to launch Customer-Oriented Global 3|Page

The Satyam Scam Organization training. In March 2001 Satyam became first ISO 9001:2000 Company in the world as certified by BVQI. In May 2001 Satyam was listed on New York Stock Exchange. In 2003, Satyam announced business continuity center in Singapore, the first of its kind outside India. In 2004, Satyam opened new development center in Mississauga, Canada. In 2005 Satyam acquired 100% stake in Singapore based Knowledge Dynamics a leading Data Warehousing and Business Intelligence solutions provider. The Company and TRW Inc, the US-based billion company, that they have signed a letter of intent to form a strategic alliance wherein the newly-formed joint venture would provide TRW and other global companies both information systems and engineering services. The Company has signed an agreement with the US-basede finder.com to build a comprehensive business intelliance e-market site that will supply more than 200 types of business data online to organisations around the globe. The Company has been named a 2000 Web Business 50/50 award winner for SatyamWorld - its corporate intranet, to become the only company to feature in this list. In 1991 it was recognized as a public limited company and got its first Fortune 500 client, Deere and Co. Satyam went in for a public issue of equity shares with the main objective of setting up a software technology park and a 100 percent export oriented unit for software development with a dedicated 64 KBPS satellite link.The 90s were a time of growth for the company. It started Satyam Renaissance, Satyam Infoway, Satyam Spark Solutions and Satyam Enterprise Solutions and Infoway became the first Indian internet company to be listed on the NASDAQ.The new millennium saw Satyam acquire lot of businesses and expand. Satyam became the first company in the world to start a program called Customer-Oriented Global Organization training in the year 2000 in May. The company signed contracts with various international players like Microsoft, Emirates, TRW, i2 Technologies and Ford. On the way the company had had various achievements like becoming the first ISO 9001:2001 company in the world, certified by BVQI, winning the Frost and Sullivan Award for Competitive Strategy in ASP in the year-2001etc. In 2001 Satyam opened offices in Singapore, Dubai and Sydney. Throughout the starting years of the new century Satyam expanded its business to many countries and signed MoU with many companies. In 2005 it acquired a 100% stake in Singapore based Knowledge Dynamix and 75% stake in London based Citisoft Plc. Satyam is a company on the fast track to success and has acquired itself a name for consulting in the area of strategy right through to implementing IT solutions for customers.

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The Satyam Scam

BYRRAJU RAMALINGA RAJU

Founder and Chairman of Satyam Computer Services Ltd; Chosen as Ernst & Young Entrepreneur of the Year For Services in 1999. Byrraju Ramalinga Raju is one of the pioneers of the Information Technology industry in India.Ramalinga Raju was born on September 16, 1954 in a family of farmers. He did his B.Com from Andhra Loyola College at Vijayawada and subsequently did his MBA from Ohio University, USA. Ramalinga Raju had a stint at Harvard too. He attended the Owner / President-course,Harvard. After returning to India in 1977, Ramalinga Raju moved away from the traditional agriculture business and set up a spinning and weaving mill named Sri Satyam. . Thereafter he shifted to the real estate business and started a construction company called Satyam Constructions. In 1987, Ramalinga Raju founded Satyam Computer services Company Private LTD. along with his brother-in-law DVS Raju.He has won several awards and honors, Dataquest IT Man of the Year in 2000, CNBC's Asian Business Leader - Corporate Citizen of the Year award in 2002 and E&Y Entrepreneur of the Year Award in 2007. Raju resigned from the Satyam board after admitting to cheating six million shareholders, some of whom have lost their entire life savings.. After being held in Hyderabad's Chanchalguda jail on charges including cheating, embezzlement and insider trading, Raju was granted bail on 18 August 2010. A botched acquisition attempt involving Maytas in December 2008 led to a plunge in the share price of Satyam. In January 2009, Raju indicated that Satyam's accounts had been falsified over a number of years. He admitted to an accounting dupery to the tune of 7000 crore rupees or 1.5 Billion US Dollars and resigned from the Satyam board on January 7, 2009. In his letter of resignation, Raju described how an initial cover-up for a poor quarterly performance escalated: "It was like riding a tiger, not knowing how to get off without being eaten." Raju and his brother, B Rama Raju, were then arrested by the Andhra Pradesh police on charges of breach of trust, conspiracy, cheating, falsification of records. Raju may face life imprisonment if convicted of misleading investors. Raju had also used dummy accounts to trade in Satyam's shares, violating the insider trading norm Raju has admitted to overstating the company's cash reserves by USD$ 1.5 billion. Raju was hospitalized in September 2009 following a minor heart attack and underwent angioplasty.

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The Satyam Scam Raju was granted Bail With a condition that he should report to local police station once a day and another condition that he should not make attempt to tamper with the current evidence.

RAMALINGA RAJUS BAIL

Former Satyam chief Ramalinga Raju, his brother Rama Raju and four others soon had to go back to jail in the Rs 7,000-crore financial fraud case as the Supreme Court on Tuesday that week cancelled their bail reversing an Andhra Pradesh High Court order directing their release from jail three months ago. The court, however, asked the trial court to speed up the trial and complete it by July 31 next year, and said that the accused could seek bail if the deadline was not met. The decisive victory for CBI against odds voluminous evidence impeding expeditious completion of trial -- came after a Bench comprising Justices Dalveer Bhandari and Deepak Verma accepted the agency's argument that release of the accused, who had recruited most of the employees who were now witnesses in the case, could allow them to influence the witnesses jeopardising a fair trial. But, the Bench softened the blow by saying would that Raju brothers and V Srinivas, G Ramakrishna, D Venkatapathy Raju and C Srisailam surrender before court on Nov 8, so they could celebrate Diwali.

Asking the trial court to expedite the trial and complete it by July 31 next year, the Bench requested the chief justice of the HC not to transfer the trial judge as that could delay the trial. To speed up the trial process, it asked additional solicitor general Harin Raval, who appeared for the CBI, not to cite the entire voluminous evidence but those crucial documents to save time of the trial court. Moreover, it also told him to make a list of material witnesses who needed to be examined by the trial court rather than producing all the 400-odd witnesses. The order came on an appeal filed by CBI challenging an August 18 order of the HC granting bail to Raju and five others on the ground that the huge volume of evidence and large number of witnesses have snuffed out chances of an early conclusion of trial against the accused. Though the apex court generally does not interfere with the orders of the HC granting bail, the Bench of Justices Bhandari and Verma reasoned for making an exception in Satyam case, one of the worst financial frauds that led to investors lose heavily in the stock market. "We usually do not reverse the bail granted by the HC, but the case is based on exceptional facts," it said. The CBI had told the SC that most of the probe had been completed but the global nature of the scam was pending verification as it had sent out letters rogatory to six countries including the USA, UK, Belgium and Mauritius, and said the accused were needed to be kept in custody till it got responses. After cancelling the bail, the SC was careful in adding a footnote -- no part of its order should be treated as dealing with the merits of the case and that the trial court would proceed with the case uninfluenced by its bail cancellation-order. 6|Page

The Satyam Scam

But then Nearly 20 months after his arrest, founder and ex-chairman of Satyam Computer Services Ltd, Mr B Ramalinga Raju, stepped out of judicial custody.Mr Justice Raja Elango of Andhra Pradesh High Court granted bail to Mr Raju, the prime-accused in the Rs 7,136-crore financial fraud case, which hit the headlines in January 2009.The court had taken the parity option' into consideration while granting the bail which is based on a similar view of its earlier decision to grant bail to five of the accused, including Satyam's ex-CFO, Mr V Srinivas, and former MD, Mr B Rama Raju.Mr Raju was required to provide two personal securities worth Rs 20 lakh each. He had to attend the special court for trial after he was discharged from hospital, where he was undergoing treatment for Hepatitis C-related ailment.Mr Raju has been given bail on the condition that he will remain in Hyderabad till further orders, his defence counsel, Mr Bharat Kumar, told newspersons in the High Court premises. CBI TO APPEAL According to Mr V.V. Lakshmi Narayana, DIG, Central Bureau of Investigation (CBI), the investigating agency would go on an appeal against the bail in the Supreme Court.We will be moving the Supreme Court immediately once we receive the High Court order copy,'' Mr Narayana told Business Line.In March, the Supreme Court had dismissed a bail plea by Mr Raju.Meanwhile, doctors at the Nizam's Institute of Medical Sciences (NIMS), told newspersons that Mr Raju required treatment for 16 more weeks. Dr Ajit Kumar, in-charge of gastroenterology department, said Mr Raju could not be discharged for the next four months if he continued to undergo treatment in the same hospital.Mr Raju had himself surrendered to the police on January 9, 2010, two days after the controversial letter he wrote to the Securities Exchange Board of India disclosing many irregularities in the management of Satyam. Thus, he had brought into light the biggest scam in corporate history.Mr Raju, who was initially lodged in Chenchalguda Prison along with nine other accused, including Mr V Srinivas, ex-CFO of Satyam and former managing director, B Rama Raju, is undergoing treatment at NIMS since December 2009.Mr Raju's health problems surfaced when he was taken to NIMS by police after he complained of chest pain in September 2009.Mr Raju was not attending the court for trial which had delayed the entire process. Later Mr Raju was permitted by the court to respond to the trial through questionnaire from NIMS.Incidentally, his bail coincided with the hearing on framing of charges on the accused in the special court for trying Satyam case. As per the three charge sheets filed by the CBI in the case, the charges on the accused included criminal conspiracy, cheating and forgery and falsification of accounts. With Mr Raju's bail, all 10 accused in the case are now out on bail.

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The Satyam Scam

CHAPTER NO. 3 THE SATYAM SCAM

No matter how much we snub, the bad luck has followed us right into the New Year. The show stopper this time around is our one time super star - Satyam. The company, once cajoled by investing community, revered by new IT aspirants and one of the more trusted IT partner, is no more than a fallen angel today.Satyam, the fourth largest Indian IT company, with an employee strength of around 53,000 people, could have had a better story to tell, had not the promoters indulged into accounting malpractices and financial manipulations. This fact came to light today, when the Satyam chairman and promoter, Mr. Ramalinga Raju, in his resignation letter to the capital market fraternity, brought to fore the mammoth scale at which thecompany has been manipulating its financial numbers over past eight years. It attributed all its recent actions as attempts to salvage the company from imminent fate. In his letter to the entire financial market community, the chairman states that the companys profits had been manipulated over the last several years, with the balance sheet as on September 30, 2008 carrying inflated (non-existent) cash and bank balance of Rs 5,040 crore (as against Rs 5,361 crore reflected in the books), an accrued interest of Rs 376 crore which is non-existent, an understated liability of Rs 1,230 crore on account of funds arranged by the promoters and an over stated debtor position of Rs 490 crore (as against Rs 2651 reflected in the books). By the end of the day, the fourth largest IT company lost a staggering Rs 10,000 crore (Rs 100 billion) in market capitalisation as investors reacted sharply and dumped shares, pushing down the scrip by 78 per cent to Rs 39.95 at BSE. The NYSElisted firm could also face regulator action in the US.The government, regulator SEBI and the industry reacted with shock and anguish over the turn of events that could tarnish India's corporate and raise vital issue like ethics, corporate governance and accounting and business practices. Acting in tandem, Corporate Affairs Ministry and SEBI announced that the episode would be probed and action taken against the perpetrators of the fraud that entails inflating profits and creating fictitious assets. Satyam Computer Services Ltd was in a total mess with the Former Satyam Chairman B Ramalinga Raju surrendering before the andhra pradesh police under sections 120B, 409, 420, 468, 471. Along with him his brother and the companies CFO was also arrested on that evening. The Securities and Exchange Board of India [SEBI] has ordered for an enquiry to look into this matter in detail. Along with this news the most important point would be the stock prices dipping more and reached 6Rs/share which is seriously very low considering it was trading it 400-500Rs levels a year back. The stock prices 8|Page

The Satyam Scam clearly shows that the company has lost its value among the investors and everyone is looking to sell out. Though Mr. Raju has clearly stated that none of the high level management has the idea of the brewing trouble; the board and the management cannot plead innocence on the basis of ignorance, when their prime duty is safeguarding the interest of Satyam and all the stakeholders of the company. This incident sent Indian equity markets in a tailspin, with Bombays main benchmark index falling 7.3%. The stock price crashed to Rs. 30.70, a fall of 83% from the opening price of Rs. 179.10. It was recommend that all the investors hold the stock because when they have already lost 90% of the value why not atleast risk with the 10%? If this 10% again grew back to atleast 30-40% after some days by chance in case of the take over/ acquitision then they had a better option rather than regretting in the future. The stocks closed at 23.75Rs which is again 41% down from the last trading day and it was originally moving up from the 6Rs figure which means that there are still many people who believe in the company. The owners would be scammers but not the 53000 employees who worked hard in the company to fulfil their targets and there are numerious Saytam clients who are still willing to continue with the company and are ready to give contracts/orders. The only problem would be that since the company is in a problem now, all their accounts would be siezed and even if the business operations are operated the payments would be struck. This is the reason the employees are in panic stage and have already started looking out for new job options in case the company is closed for a while. Along with the already employed staff there are around 10000 freshers every year who are in waitlist waiting for their call from Satyam who are also going to not get a call back and they now have to apply for other MNCs. The fact is that its not alone Raju in this whole drama who has claimed that he is alone responsible but how do you think a single person can do such a big fraud? What about the people are always with him in his business operations? What about the government who gave the company public lands at dirt cheap amounts. Not only the satyam clients but their employees were also having a hufe confidence in the company and were sure that the company will continue in the long run along with better growth but the question stands the same .But One of the biggest Chartered Accountancy PricewaterhouseCoopers which is highly reputed in India because there are thousands of students trying to get into PWC for completing their CA Course, is also in question because this firm was handling all the Satyams 9|Page

The Satyam Scam operations and if such a big scam was running around how did PWC not find out? Or were these people also bribed by Mr Raju in tunes of crores of rupees and will this networked chain keep continuing. This leads one to ask a simple question: How do such scams keep happening - At the Columbia Business School, there is a course called Performance Measurement in which we study some of the dynamics that lead to this type of accounting scandal. In the course, we study the fraud committed at WorldCom and Kidder Peabody in detail. In our studies, a distinct pattern emerges.It starts small. Typically, executives do not wake up one morning and say, "I feel like adding 5 billion rupees to our revenue today." They usually start by fudging the number a little--and then it grows.It is usually a response to competitive pressures. Companies have targets that they need to reach every month, quarter and year. These targets can come from their internal budgets or from the expectations of their shareholders and stock market analysts.The fiddle is easy to rationalize at first. Managers typically have confidence in their skills and believe that their company is fundamentally sound. Given that, it's easy to rationalize that while we're just a little short on the numbers now, we will make it up in the future, and nobody will know.It gets out of control. When the company is unable to make up the gap, a larger distortion is needed to cover it up. This in turn creates pressure to deliver even better results--which leads to bigger cover-ups, and so on. The website of Ramalinga Raju which is ramalingaraju.com is also totally down which again adds up another negative point because if you start hiding more and more stuff from the public you are going to be accused more for your mistakes. Not only this small site but the corporate website ie satyam.com was also giving problems in the last 3-4 days with no downloads given to the public for the company data. The retail investors amount to approx 25% who have now lost 90% of their value and along with the already falling down stock markets satyam has added a big loss for everyone and now everyone is looking for either selling the stocks for almost no value or else buy some more stocks at this low rates to average their old portfolio and hope it recovers back soon to atleast the costs. The village from which Ramalinga Raju hails still believes on him and all his known ones are buying huge amount of stocks at the moment to prove that they believe him and there is no need to worry about the company. Its still to wait and see how this whole story turns out and where does Satyam stand after sometime .A financial scandal to the tune of Rs 7,000 crores in Satyam took the world by surprise, leaving the investors and the clients of Satyam in lurch. The Chairman of the company, B. Ramalinga Raju, after resigning from his post is now untraceable. In a letter to one of the board members of the company, he disclosed that the Satyam has been showing the inflated balance sheet for the years. The fraud could not be noticed by even the auditors of the company - PricewaterHouse. There is intense debate about the 10 | P a g e

The Satyam Scam role of PricewaterhouseCoopers, the external auditors of the company in clearing the accounts of Satyam. Auditors are supposed to have checked, verified cash balances, bank statements, assets with relevant confirmations. Satyam was a large company, not a street store; PricewaterhouseCoopers is a globally reputed firm. Professional accounting bodies and police are currently examining the role of the auditors in the Satyam corporations fraud very minutely.The Companies Act in India has stringent corporate governance requirements of board members. Yet Raju was able to steer the fabricated accounts through his board members for 6-years. This has bewildered the corporate sector and regulators. At times, the company was holding excessive cash, as per the books. This should have invited questions by board members. An independent director would normally assume that audited accounts have been rigorously examined. This is more so when an internationally credible firm- like PricewaterhouseCoopers- has audited the numbers. But, they need to still ask the right questions and probe. Sitting on numerous boards compresses the time an independent director has to reflect on what is happening inside the belly of a company. This is by no means seems to be the end to the Satyam saga, which has been unfolding since the last year. In the month of December 2008, the company, in an incomprehensible move, announced the acquisition of two of its promoter group companies namely Maytas Properties (unlisted) and Maytas Infrastructure(listed); which the chairman in his letter acknowledges as a last attempt to fill the fictitious assets with realones. The deal was called off within a space of 24 hours on strong opposition from the other stakeholders.This was followed by a suit filed against Satyam by a client Upaid, a UK-based online and mobile payments enabler; which further maligning the companys corporate image. As if this wasnt enough, World Bank, one of the biggest clients of the company - imposed an 8-year ban on the IT Company from doing any offshore work with it on the reports of data theft. These string of mishappenings, raised serious Corporate Governance Issues for Satyam, and also raised concerns on the global level about the corporate governanceethos of India Inc. And now with the chairman having made a clean breast of fraud, things are only looking grimmer for the company. At this point in time, the company seems to be lucrative acquisition target,with poor shareholding pattern, disappearing market faith and hopeless financial state. With all said and done, this incident will badly jolt the investors confidence in India Inc. FII investment would be impacted and technology stocks would be viewed sceptically, as the sector does not have much tangible assets to account for. As corporate governance and business ethics become increasingly elusive to the corporates, stringent measures need to be put in place, prevent such a fraudulent activities from happening.

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The Satyam Scam Satyam Computer Services Ltd was in a total mess with the Former Satyam Chairman B Ramalinga Raju surrendering before the andhra pradesh police under sections 120B, 409, 420, 468, 471. Along with him his brother and the companies CFO was also arrested next evening. The Securities and Exchange Board of India [SEBI] had ordered for an enquiry to look into this matter in detail.Along with this news the most important point was the stock prices dipping more and reached 6Rs/share which is seriously very low considering it was trading at 400-500Rs levels a year back. The stock prices clearly showed that the company had lost its value among the investors and everyone was looking to sell out. It was recommend that investors still hold the stock because when they have already lost 90% of the value why not atleast risk with the 10%? If this 10% again grew back to atleast 30-40% after some days by chance in case of the take over/ acquitision then they had a better option rather than regretting in the future.The stocks closed at 23.75Rs which is again 41% down from the last trading day and it was originally moving up from the 6Rs figure which means that there are still many people who believe in the company. The owners would be scammers but not the 53000 employees who worked hard in the company to fulfil their targets and there are numerious Saytam clients who are still willing to continue with the company and are ready to give contracts/orders. The only problem was that since the company was in a problem , all their accounts were siezed and even if the business operations were operated the payments would be struck. That was the reason for the employees in panic stage had already started looking out for new job options in case the company was closed for a while. Along with the already employed staff there were around 10000 freshers every year who were in waitlist waiting for their call from Satyam who are also going to not get a call back and they had to apply for other MNCs

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The Satyam Scam

CHAPTER NO. 4 THE AFTER EFFECTS

Raju had appointed a task force to address the Maytas situation in the last few days before revealing the news of the accounting fraud. After the scandal broke, the then-board members elected Ram Mynampati to be Satyam's interim CEO. Mynampati's statement on Satyam's website said:"We are obviously shocked by the contents of the letter. The senior leaders of Satyam stand united in their commitment to customers, associates, suppliers and all shareholders. We have gathered together at Hyderabad to strategize the way forward in light of this startling revelation." On 10 January 2009, the Company Law Board decided to bar the current board of Satyam from functioning and appoint 10 nominal directors. "The current board has failed to do what they are supposed to do. The credibility of the IT industry should not be allowed to suffer." said Corporate Affairs Minister Prem Chand Gupta. Chartered accountants regulator ICAI issued show-cause notice to Satyam's auditor PricewaterhouseCoopers (PwC) on the accounts fudging. "We have asked PwC to reply within 21 days," ICAI President Ved Jain said. On the same day, the Crime Investigation Department (CID) team picked up Vadlamani Srinivas, Satyam's then-CFO, for questioning. He was arrested later and kept in judicial custody. On 11 January 2009, the government nominated noted banker Deepak Parekh, former NASSCOM chief Kiran Karnik and former SEBI member C Achuthan to Satyam's board. Analysts in India have termed the Satyam scandal India's own Enron scandal. Some social commentators see it more as a part of a broader problem relating to India's caste-based, family-owned corporate environment. Satyam's shares fell to 11.50 rupees on 10 January 2009, their lowest level since March 1998, compared to a high of 544 rupees in 2008. In New York Stock Exchange Satyam shares peaked in 2008 at US$ 29.10; by March 2009 they were trading around US $1.80.The Indian Government has stated that it may provide temporary direct or indirect liquidity support to the company. However, whether employment will continue at pre-crisis levels, particularly for new recruits, is questionable. On 14 January 2009, Price Waterhouse, the Indian division of PricewaterhouseCoopers, 13 | P a g e

The Satyam Scam announced that its reliance on potentially false information provided by the management of Satyam may have rendered its audit reports "inaccurate and unreliable". On 22 January 2009, CID told in court that the actual number of employees is only 40,000 and not 53,000 as reported earlier and that Mr. Raju had been allegedly withdrawing INR 20 crore rupees every month for paying these 13,000 non-existent employees. Although several companies are trying to have a bite into Satyam Computers, according to Gartner study, the company is likely to exist in its current form. It is expected to discontinue some of its businesses, service lines or cease to exist in certain geographies by 2010. The study indicated that even the name Satyam may not be around by that time, as the company is expected to undergo a complete change, in ownership and organizationally. Satyams ability to sign on new clients during 2009 has significantly diminished, says the study. In addition, it will be challenged to invest in client engagements, staff developments or R&D, all critical elements for IT services, said Gartners V-P for research, Frances Karamouzis. Ex-Satyam Director Resigns From Board-Serial entrepreneur and NewPath Ventures co-founded Vinod K Dham resigned from the board of Sasken Communications as an independent director, a top official of the communications solutions provider said on Monday.Yes, Dham has resigned as a director of the company from the board on January 17, Sasken chairman and managing director Rajiv C. Mody told IANS but declined to elaborate.We will inform you later, as we are busy with investors and analysts in a conference call on our third quarter performance, Mody added.The US-based Dham resigned from the board of the fraud-tainted Satyam Computer Services Dec 29 as an independent director over the IT bellwethers aborted bid to acquire the two Maytas realty firms, run by the two sons of its disgraced founder and former chairman B. Ramalinga Raju. Y S Reddy Denies His Support For Raju-The political blame game around Ramalinga Raju, the founder of Satyam Computer Services and main accused over the Satyam scam has begun. Andhra Pradesh Chief Minister Y S Rajashekhara Reddy on Monday dismissed charges that he was responsible for the rise of Satyams tainted founder Ramalinga Raju and instead sought to put the blame on his predecessor and TDP leader N Chandrababu Naidu.By the time I became the Chief Minister, Raju had already risen to very high level. I am not responsible. In no way, he needed my promotion. All the promotion was already done, he told the reporter. Post Satyam Scam, Indian Students Shun IT Companies -The Satyam effect has starting spreading its tentacles, and has proved to have a negative impact on the Engineering students. IT (Information 14 | P a g e

The Satyam Scam Technology) which used to be the Mecca of all jobs is now the outcaste.Students are prefering to take jobs in their core branches rather than move to the dwindling IT sector.I was offered a job as trainee employee at Satyam last year. But after the fiasco has happened at Satyam, I have changed my mind to get suitable job in other firm, said Divyadeep Goyal, a student Mechanical Engineering student of University Institute of Engineering and Technology (UEIT), who was offered an annual package of Rs 3.25 lakh in Satyam.Echoing similar views, Sumant, another final-year student of the same college, said, The impact of Satyam fraud has been so damaging that we now do not have any intention to join the IT company. Rather we will look for job in other sectors.The total number of engineering students placed by Satyam from this region was not available but some colleges have shared their placement figures.Almost 80 students from the Institute of Engineering and Technology were selected by Satyam last year, while 13 students were placed from Punjab Engineering College (PEC) and seven were from UIET.Students were offered an annual package between Rs 3 lakh and 3.5 lakh. According to placement officers of various colleges, engineering students are now looking at the core sector, comprising manufacturing and telecom sectors. Satyam May Get Financial Support From Government -The Government certainly can not remain aloof and allow Satyam to die off especially when it provides occupation to 53,000 odd people and indirectly supports more than a million Indians. While it is debatable that whether the tax payers money be used to bail out a company which deliberately got involved in a scam.The troubled Satyam Computer Services, facing a liquidity challenge, may get financial support from the government, which is willing to New Satyam board members consider all aspects of helping the crisis-ridden company, Commerce and Industry Minister Kamal Nath said on Monday.Since it was a question of saving jobs and an international Indian brand, the government would consider all the proposals from the newly-constituted board, Nath said. When asked whether the government could extend even financial help to Satyam, Nath said, Of course. There are many jobs at stake and institutional stakes. The Satyam Scam Has Dented India Inc.s Image Abroad : Huge losses to investors aside, the Satyam scandal has caused serious damage to India Incs reputation as well as the countrys regulatory authorities outside, the government has said.Seeking to dismantle the existing board and to nominate ten new directors at the beleaguered IT firm, the Centre has said in its petition before the Company Law Board that the interests of the company will not be safe in the hands of the present board of directors.The admission of fraudulent manipulation of the financial affairs has created an adverse impression in the minds of the trade, business and industry across the world.This has also resulted in serious damage to the reputation of Indian Corporate sector and the regulatory mechanism in 15 | P a g e

The Satyam Scam the eyes of the world, the government said.Allowing the government to nominate 10 new directors, the CLB said in its order that the present board of directors stands suspended with immediate effect and the new board should meet within seven days of its constitution and take necessary action to put the company back on the road.It also asked the new board to submit periodical reports to the Centre and the CLB on the companys state of affairs. The CLB also observed that the residual board members at the company after a string of resignations are those who were also party to the impugned decision to invest substantial funds in the companies related to Raju, the decision of which was the starting point of the downward trend in the fortunes of the company.Besides Satyam, Ramalinga Raju and brother Rama Raju, the government in its petition has also named the companys CA and auditor Price Waterhouse, Company Secretary as well as all the directors. This include also those independent directors who have resigned -Vinod Dham, Rammohan Rao, K G Palepu and Mangalam Srinivasan, as well as former Cabinet Secretary T R Prasad, V S Raju and interim CEO Ram Mynampati.The CLB has also asked all the respondents to submit their replies to the petition by February 20.The CLB had ordered the Central Government to immediately constitute a fresh board of the company with not more than ten persons of eminence as directors.The Central Government may also designate one of them as the Chairman of the Board The said Board will continue till further orders.The government said in its petition that Satyam has about three lakh shareholders, over 53,000 employees and has clients in over 60 countries, besides India. It has received a number of awards for best corporate governance. Indian Firms Reviewing Fraud Control Mechanism - In the face of the Satyam scam and its deadly repurcussions, Indian firms are looking into methods to avoid scenarios of such scams within their companies. Indian companies have started to review and document their risk management policies and practices to check corporate fraud in the wake of the Rs.70 bn Satyam Computer Services scam, a survey by an industry lobby says. A quick analysis by the Associated Chambers of Commerce and Industry of India (Assocham) with feedback of over 400 leading corporates, said that to deter possible corporate frauds, companies have commenced re-codifying their risk management policies. However, about 85 percent of the respondents said although Clause 49 of the market regulators Listing Agreement clearly states that the management and the board of directors must accept responsibility for not issuing accurate financial statements, most officials at this level managed to get off the hook even if found guilty. On the other hand, about 80 percent of respondents argued that putting these programmes and controls in place will help organisations to set the tone of zero-tolerance to fraud and create a mechanism for employees to report wrongdoing to the appropriate authorities. 16 | P a g e

The Satyam Scam ICICI And SBI Banks Submit Details Of Satyam Exposure To RBI As- part of its probe on scamtainted Satyam, RBI today collected particulars of transactions that various banks including SBI and ICICI Bank had with the IT company. We have submitted the details of our business deals with Satyam to the Reserve bank.In the wake of these developments (in Satyam), banks are bound to be extra cautious while lending to such corporates, SBIs Chief Financial Officer Ashok Mukand told PTI here. When asked, Citibank declined to comment if the company was its client and whether the bank had given details to RBI. We are unable to comment due to client confidentiality, a spokesperson of the bank said. The Satyam Effect : US Listed Indian Stocks Take A Beating -The Satyam scam effect has started its infectious presence. U.S. listed stocks of other Indian companies have started taken a severe beating.Indian stocks listed on the American bourses suffered a loss of close to $ 2 billion in a week, following unfolding of Indias biggestDespite, a halt in trading in Satyam Computer from Wednesday, the rest of the 15 Indian stocks on US bourses bore the brunt of the negative market sentiment and witnessed a fall of $1.94 billion in their combined market capitalisation in the week ending January 9.Meanwhile, the Hyderabad-based company, which traded on the first two day of the week, added $ 2.66 billion on the speculations that some rival IT firm might acquire it. The combined market-cap of all firms excludes Satyams valuations for the two days. Satyam accounting scandal could be 'India's Enron' -India's biggest corporate scandal in memory threatens future foreign investment flows into Asia's third-largest economy and casts a cloud over growth in its once-booming outsourcing sector. The news sent Indian equity markets into a tailspin, with Bombay's main benchmark index tumbling 7.3pc in a firmer session for world markets and the Indian rupee fell. Ramalinga Raju, founder and chairman of India's fourth-largest software services exporter, said in a statement that Satyam's profits had been massively inflated over recent years but no other board member was aware of the financial irregularities. "If a company's chairman himself says they built fictitious assets, who do you believe here? This has put a question mark on the entire corporate governance system in India," said R.K. Gupta, managing director at Taurus Asset Management in New Delhi. Mr Raju, who founded Satyam more than two decades ago and who took it public in 1991, said about $1bn (667m) or 94pc of the cash on the company's books was fictitious. The 54-year-old Satyam chairman came under close scrutiny last month after the company's botched attempt to buy two construction firms partly owned by its founders, which Mr Raju said on Wednesday was a final attempt to resolve the problem of the fictitious assets. "It was like riding a tiger, not knowing how to get off without being eaten," Mr Raju, a management graduate from Ohio University, said in his letter, adding 17 | P a g e

The Satyam Scam he was prepared to face up to the legal consequences. Satyam said its managing director and co-founder B. Rama Raju, Mr Raju's brother, had also resigned. It did not give any reason for the resignation. The company's difficulties multiplied when the World Bank, a major customer, barred Satyam from new business, citing "improper benefits" given to Bank officials. Just three months ago, Satyam received a Golden Peacock award from a group of Indian directors for excellence in corporate governance.

IMPACT ON THE INDIAN IT INDUSTRY

The impact of the Satyam scam is short-term and will pass quickly, unless there is another scandal involving another IT services firm. The negative publicity is largely media hype, amidst a political backlash against off shoring of US jobs in the current economic slump, and international corporations will continue to make the right decisions for their business models to remain competitive. As all the leading IT services vendors have significant Indian staff-bases, there will be minimal impact on the Indian IT sector as a result of this deal. Clients which sign with the Western headquartered firms (Accenture, IBM, HP etc) would have done so whether or not the Satyam scandal had happened. Customers cant easily sever their existing services relationships with Satyam without significant issues re-badging personnel, losing critical operational staff, and the expense and complications of transferring H1B-Visas. It often takes clients two-to-three years to establish an effective working relationship with their service provider and the concern is the advice several service providers are giving Satyams clients that switching will be quick, easy, uneventful and at minimal incremental cost. The question of Who will benefit from the entire episode, other Indian IT firms or international counterparts like IBMs and Accentures or newer geographies and emerging IT service players like Eastern European companies, China, Philippines etc. in which the concern is more regarding the governance of firms from countries such as China and Russia, which have much less stringent regulatory procedures than India and the US/Europe. There will not be any significant change in the market. If anything, the Mumbai attacks were more of a detriment to the Indian IT sector than this episode, as it reaised real concerns with regards to security and increased focus on a multi-location strategy. Satyam's competitors have a responsibility to behave with some modicum of decency and avoid aggressively poaching their clients in the current environment. This episode should pass quickly into the the history books, provided there is not a recurrence of this situation with other service providers. However, aggressive and greedy behavior from other service providers, while this issue still festers, is not going to do the image of India's IT services industry any good. 18 | P a g e

The Satyam Scam The IT services spend over the next 12 months will remain flat. Spendong on commodity offshore IT services will increase in the region of 5%, as international corps look at low-hanging fruit cost reduction opportunities namely application maintenance / development services however, spend on discretionary project will decrease as many initiatives are put on hold. The Indian HQ-ed suppliers have a responsibility to treat Satyams situation with sensitivity, as the reputation of the firms is currently being questioned. Customers are so far being reassured by Satyam and the expectations are that this episode will pass as Satyam either gets acquired or breaks-up and it is vital that Satyams competitors do not further tarnish the image of India HQ-ed firms by appearing greedy and insensitive. While the future of Satyam hangs in the balance, the advice for investors is to remain patient in the short-term before evaluating their future options. Yes, clients should be concerned and seek reassurances from Satyam regarding any imminent service delivery issues. However, they should disregard the propaganda coming from several of Satyams competitors, and some of the articles from business publications questioning the viability of offshore outsourcing as a consequence of the Satyam scandal. Should Satyam be acquired (which we believe likely), then there may be few compelling reasons to move to alternative service providers in the short-term. However, should Satyam start to lose critical staff and their execution suffers significantly, then clients may have little choice but to jump ship and go through the switching pain. Customers can afford to wait for at least a few weeks to evaluate the situation. It does appear that the Indian government is likely to lend some short-term support to the ailing service provider as it struggles with short-term financial liquidity, so there should not be major cause for panic at this time. It is also worth mentioning the obvious that the Satyam scam has come to light when the whole global economy has been ruined by reckless greedy behaviour by the American and European financial sector.So, the financial sector people (who do a lot of software outsourcing to India) are in no position to make a big issue out of this. That would be the pot calling the kettle black.The people in the other sectors do not have any energy left to cry foul, after what the financial sector people have wrought. The question here is that is the new administration in the US likely to become more protectionist and will it have any impact on IT outsourcing in general and offshoring in particular. President Obama will be incentivizing US firms to create onshore jobs, but wont be penalizing them for using global delivery services from locations such as India. We've now been sucked into a global employment war for sourcing services, and Mr Obama, intends to give US firms tax-breaks to source work onshore. He will plans to initially incent buyers, as opposed to the providers, to source work to onshore US 19 | P a g e

The Satyam Scam locations. This is the opposite strategy of the Indian government's STPI tax scheme, which gives taxbreaks to new Indian organizations (mainly suppliers) in the region of 10-20% for their first 10 years of inception, designed primarily to bolster its software industry, but also directly applies to its service providers. For IT services, it's looking a bit late to pull much of this back. In India, for example, IT services have become the life-blood of the country's economy, and the skills in basic programming are widely available for mainstream applications. Even if US wage rates for programming work come down significantly, there is also a major issue with the fact that the quality of many IT services delivered from offshore locations is now consistent. The core battle is with services needed from business-process architects and staff with deep industry-specific expertise. We have seen many of the leading offshore providers invest in their onshore deliver centers over the last year - and we can expect to see continued significant competition between the incumbents and offshore providers in the coming months for onshore-related work. For BPO services, the US is still in the game. The issues surrounding client / employee contact still favor onshore services (even though offshore services are improving by the day), plus the fact that there is still a great supply of mid-level executives who will be anxious to keep their jobs in the forthcoming months. With significant incentives to keep work onshore, we can see the US stepping up as a serious BPO location. Not a bad thing for the BPO industry, as long as the service providers invest wisely in attaining the right onshore/offshore balance within their delivery infrastructures. Moreover, the onus on sourcing we're going to see from the restructuring financial services industry is going to entail a delicate balance of onshore/offshore BPO work. If the major financial services firms struggle to sell off their Indian captives, we may well see several of them scale-down their offshore dependence and seek onshore services as an alternative. We can look at it this way, you can hire staff in low-cost US locations for a low as $25K a year for back-office administrative work. If you can reduce that further, to $22K a year as a result of tax incentives, and the cost of health-care is reduced/subsidized, the price differential with locations such as Lat-am and India is minimal. IT, on the other hand, is significantly cheaper in locations such as India and China for all levels of services.

20 | P a g e

The Satyam Scam

FALL IN SATYAMS SHARE PRICE

Indian equities markets were reeling under tremendous selling pressure after a shocking scam by the promoters of Satyam Computers came to light. Ramalinga Raju, chairman of Satyam Computers resigned from his post and confessed to indulging in fraudulent activities like inflating the books for several years. Raju has written a letter to the board giving details of the balance sheet. Balance Sheet has inflated cash balances of Rs 5040 crore and accrued interest of Rs 376 crore is non-existent. Rs 1230 crore was arranged to Satyam and is not reflected in the books. As per the revelations, second Quarter numbers were inflated to Rs 2700 crore vs Rs 2112 crore actual numbers. No board member had any knowledge of the real situation of the books. Bombay Stock Exchanges Sensex breached support of 10,000 mark. At 1:45 pm, Sensex was at 9564, down about 772 points.National Stock Exchanges Nifty was at 2908, down about 200-points. Satyam Computers (-61.42%), Jaiprakash Associates (-13.24%), Reliance Communications (-10.91%), DLF (-10.29%) and Reliance Infrastructure (-8.11%) were the major Sensex losers.Tata Steel (1.32%), Infosys Technologies (0.21%) and Maruti Suzuki (0.20%) were the only gainers. Market breadth was negative on the BSE with 1670 losers and only five hundred and fourty one advances. Terming disclosures of financial wrong-doings at Satyam as an event of 'horrifying magnitude,' the Securities and Exchange Board of India in that week said that it would take all steps under law for which it has started discussions with government and bourses."We are in touch with Ministry of Corporate Affairs. We are also in discussion with them as to what steps need to be taken from the perspective of power they have under the law and Sebi has under the law," Sebi chairmanC.B.Bhave.The government has decided to refer the Satyam case to Serious Fraud Investigation Office, 21 | P a g e

The Satyam Scam an official of the Ministry of Corporate Affairs said. Meanwhile, the Satyam Computer stock nosedived nearly 70 per cent to an all-time low of Rs 58, following the resignation of the company's chairman B Ramalinga Raju and Managing Director B Rama Raju.Shares of Satyam plunged as much as 67.71 per cent to a low of Rs 58, but was later trading at Rs 73.50, down 58.96 per cent in the afternoon trade on the Bombay Stock Exchange.The scrip, which had opened at Rs 179.10, plunged within minutes of Satyam chairman and managing director tendering their resignation. The latest imbroglio involving one of India's largest IT companies, Satyam Computer Services, has virtually discredited the concept of corporate governance. Satyam share price is definitely worth watching after the company was taken over by Tech Mahindra. The best thing is that a lot of people who make use of the special situation were able to get hold of the Satyam shares at literally throw away prices. At one point the stock price of Satyam was near about Rs.6. A lot of analysts that moment were suggesting not putting the money in Satyam. But the fact is that the luck favors the brave. Imagine the returns when the current price is Rs.122.The Satyam stock price was bound to go up once the government stepped in and it did a wonderful job after the Satyam scam broke out. The government appointed the board of directors who did a good job in retaining talent, talking to the customers and then looking for a buyer. That said I am a keen buy and hold strategy player but as always said there is nothing which can keep you from taking advantage when an opportunity arises. You need to see what your risk taking ability is and then jump right in. It is here that a lot of people always follow the herd and its very sure that a lot of folks would never even have thought of buying Satyam as they would thought that the stock is doomed. The future for Satyam looks bright and Its sure that the Satyam share price will zoom ahead once the results are announced. Even if the results of the previous year are bad it will yet be an opportunity to invest more money in this stock as the management is very capable and the future earnings definitely look good. The previous results will be short term blip on an overall long term growth story and people should easily buy at these levels. Mr. Ramalinga Raju milked crores to invest in real estate and in the end it was big mistake which he could not correct. Shares in Satyam Computer Services Ltd jumped as much as two-thirds on Monday on expectations a government-appointed board will rescue the company in the wake of India's biggest corporate scandal.The board is meeting at Satyam headquarters in Hyderabad to lay out a roadmap for a firm battling for survival after its former chairman quit last week and confessed that profits had been falsified for years.The BSE Sensex and the rupee currency were hit as investors worried about the 22 | P a g e

The Satyam Scam damage to foreign investment in Asia's third-largest economy and the once-booming outsourcing sector, a magnet for thousands of the young job seekers in the country currently. "I think they (board) will look at providing stability to employees and clients first. What they have to see in the next three months is that Satyam is still not bleeding," said Avinash Vashistha, chief executive at the consultancy

The question here is that, Does an 87 percent decline in the stock price of Satyam Computer during that week make it an attractive buy? The answer, if you are a long-term investor, is for the moment a resounding no.Thats because the startling confessions of the companys founder, Mr Ramalinga Raju, that week make it quite difficult for an investor even to guess the real size, scale, nature or profitability of the companys operations, all of which would be key to arrive at the stocks real value. To decide if the stock is indeed undervalued at that weeks close price of Rs 24, you need to have some measure of what the company is really worth. (Remember, the face value of the stock is not Rs 10, but Rs 2). Minuscule assets With much of the cash on its books turning out to be fictitious, the only other assets of note are land and plant and machinery. These were valued at about Rs 424 crore or just Rs 6.3 a share, based on their March 31 book value.Mr Rajus statements reveal that the companys quarterly revenues and operating profits are overstated to the extent of 22 per cent and 90 per cent respectively. Adjusting for this, its operating profit margins would stand at 3 per cent, while other top IT companies report 25-35 per cent. Institutional exodus The aborted Maytas deal and the chain of events that week had seen FIIs as well as domestic brokerages suspending their coverage of the stock, while institutional investors have exited, in an exodus. That these investors have exited at prices ranging between Rs 13 and Rs 45, speaks of their 23 | P a g e

The Satyam Scam disinterest. The stocks exclusion from bellwether indices such as the Sensex and Nifty and its removal from the derivatives segment could be the last straw that will ensure that institutional investors do not even buy it as a part of their basket trading in the Indian indices.

THE INDIAN GOVERNMENTS STEPS TO SAVE SATYAM

The central government on Friday sacked Satyam Computers directors and announced it will appoint 10 new directors within seven days to run the company tottering on the brink of collapse after its founder B. Ramalinga Raju rocked corporate India by confessing to the countrys biggest financial fraud of Rs.70 billion (RS.7,000 crore).With this move Saturdays meeting of the truncated board of the company was cancelled. The board has shrunk from nine to five members after four independent members quit in the wake of Rajus aborted bid Dec 16 to buy two cash-strapped firms, Maytas Properties and Maytas Infra, promoted by his two sons.The government wants to protect the interests of the employees (53,000) and other stakeholders, Company Affairs Minister Prem Chandra Gupta told reporters in New Delhi. He said the Company Law Board has agreed to the governments proposal to restrain Satyam board members to continue as members and appoint 10 new members. The government move was cheered by Satyam employees whose job was at stake as the company had funds to pay only the December 2008 and January 2009 salary which, according to the firm, comes to Rs.5 billion (Rs.500 crore) a month.The ministers announcement came within hours after market regulator Securities and Exchange Board of India summoned Raju to appear before it Saturday to depose on the massive fraud by him.The announcement coincided with the crime branch of the Andhra Pradesh police beginning its own probe into the scam. Gupta said in New Delhi that the Company Law Board has already issued an order to the existing directors of the board restraining them from exercising their functions and the order becomes effective immediately.The SEBI office at Hyderabad has already taken action which includes seizure of documents of the company and the ministry of corporate affairs has already sent a team of officers who are now inspecting Satyams eight group companies, he said. On issues of gross violation of corporate governance norms by the company, Gupta said: The Satyam case in an aberration, the government is determined to take all possible actions under the law to bring to book all those persons who are responsible for betraying the faith of lakhs of shareholders, employees and customers within and outside the country.As the enormity of the scandal broke out, role of auditors of the company, 24 | P a g e

The Satyam Scam PricewaterhouseCoopers (PwC) came under the scanner. Action has already been initiated by the Institute of Charted Accountants of India (ICAI) against the auditors of the company, added Gupta. The 54-year-old Raju appeared before a SEBI team at Satyams corporate office at 4 p.m. Saturday, his lawyer S. Bharat Kumar said.SEBI wanted Raju to depose Friday itself but the lawyer sought a days extension as the time was too short.The regulator has granted my client (Raju) 24 hours for deposing before its investigative team on our request. The lawyer met the SEBI team at the Satyam office Friday evening and informed it that Raju was not keeping well and the time given for deposition Friday was too short.I requested the regulator in writing for one-day extension, as the summons were served today (Friday) at 2.30 p.m. for the hearing at 4 p.m. As the summons were given at a short notice, it was difficult for my client to rush for the hearing as he has also not been keeping well, Kumar said.In the absence of Raju or his family at his residence in the upmarket Jubilee Hills neighbourhood, the summons were handed over to the security officer on behalf of the regulator. The Satyam board had nine members - Raju, his brother B. Rama Raju, wholetime member Ram Mynampati and six independent directors. Four of the independent directors quit the board in the wake of aborted bid by Raju Dec 16 to make Satyam buy two firms, Maytas Properties and Maytas Infra.With the resignation of Mangalam Srinivasan, Krishna Palepu, Vinod Dham (all three based in the US) and M. Rammohan Rao, the board now is left with Mynampati, T.R. Prasad, former cabinet secretary to the Indian government, and V.S. Raju. The Satyam scrip was further mauled in Fridays trading. The government, regulator SEBI and the industry reacted with shock and anguish over the turn of events that could tarnish India's corporate and raise vital issue like ethics, corporate governance and accounting and business practices. Acting in tandem, Corporate Affairs Ministry and SEBI announced that the episode would be probed and action taken against the perpetrators of the fraud that entails inflating profits and creating fictitious assets. At one point it was quoted at around Rs.6.While the New York Stock Exchange had stopped trading in the scrip Wednesday, the day Raju stunned everyone by his admission of the massive fraud, the Bombay Stock Exchange (BSE) had taken it out of its key 30-scrip index, the Sensex. There was speculation Friday that Ramalinga Raju might be arrested though the Andhra Pradesh police had said Thursday that they cannot do so merely on the basis of his confession that he had rigged figures to inflate the companys profits.There were also an unconfirmed report that Satyams chief financial officer Srinivas Vadlamani had attempted suicide, but the company denied it. Vadlamanis 25 | P a g e

The Satyam Scam name does not figure among the people Raju has mentioned in his resignation letter absolving them of any wrongdoing.Vadlamani Thursday sent his resignation to the interim chief executive Mynampati, who said the resignation has not been accepted.There were also reports circulating that the interim team has also sent a mail to the employees saying they would not be paid salary for two months. Mynampati told a press conference on Thursday that the December salary is being paid and the company has funds to meet salary commitments for January.Mynampati said the interim management was scouting for a strategic investor as the company was facing severe funds crunch. He said the option of outright sale of the company was not ruled out. He also said about 100 clients who contribute 80 percent of the $2 billion revenue had assured they would stay with the company.

A new board of directors has been appointed to save the Satyam Computer Services corporation. It comes after the co-founders of the company were arrested on charges of criminal conspiracy and forgery.The shamed former chairman of Satyam Computer Services will spend the next two weeks in custody as authorities try to unravel India's biggest corporate scandal.Ramalinga Raju and his brother Rama, who co-founded India's fourth largest IT firm, were arrested late on Friday on charges including criminal conspiracy and forgery.Now the Indian government has appointed three eminent members of the business community after dissolving the company's existing board, to limit the fallout from the scandal. Mr. Prem Chand Gupta who is Indias Corporate Affairs Minister said that : "Having considered all aspects of the current situation, the government has decided to constitute a board of eminent persons having expertise in different fields like finance, information technology, law and administration. Such a board would provide the necessary vision along with responsible and accountable leadership to the company in this hour of crisis."The state chief of Southern Andhra Pradesh also said the top priority of the government would be to save the jobs of the employees of Satyam. The latest news comes as worried workers send their resumes to job portals and other firms. and Mr. Rajasekhara Reddy, who is State Chief Of India's Southern Andhra Pradesh said that: "Basically we are interested in engineers who are working and the IT Professionals who are working there. SO, whatever needful help Government of India wants, we are willing to give."But with a global slowdown putting the brakes on India's 50 billion dollar IT industry jobs will be difficult to come by. Anurag Goel, the then secretary of the ministry of corporate affairs, is widely seen as the man behind the governments unprecedented effort to rescue Satyam Computer Service Ltd. A year after 26 | P a g e

The Satyam Scam Satyam promoter B. Ramalinga Raju confessed to masterminding Indias biggest corporate fraud at what was then Indias fourth largest information technology (IT) firm, Goel, a 1972-batch Uttar Pradesh cadre officer, has broken his silence to explain in an interview how the government rescued Satyam and its 53,000 employees. When the day dawned on 7 January last year, Satyam was Indias fourth largest (IT) company... At 11.32am that day, he received a phone call and email from Sebi (market regulator Securities and Exchange Board of India) chairman C.B. Bhave, informing him about the communication that Raju had sent to a lot of people. Everybody was in a state of shock that this could happen in Satyam. he immediately informed his minister (corporate affairs minister) Prem Chand Gupta and went over to him. The governments role was only to make sure the fraud perpetrated by the founders is investigated impartially and the guilty are brought to book. Nothing more. The shareholders who are the rightful owners of Satyam Computers will have the full right to decide the future of Satyam Computers. By the evening they had some idea of the kind of dimensions (of the unfolding scandal). A lot of factors (were at play). It was a hit on an IT companya Rs7,300 crore firmthat had the potential to impact India Inc. in general and Indian IT in particular. Remember this was also the time of the economic meltdown and we were very concerned over that. We were also concerned over the impact on the 53,000 employees... There were mission-critical things being done by the company for many people. In fact, this was the reason that during the day, the minister and he had agreed that apart from investigating, they also needed to save the company.It was decided in the first few hours itself that the government will save the company as a lot of factors like the ones he has mentioned and also the impact on Indias image abroad as an investment destination (came into play) When he thought it through at midnight, three things became clear to him. First, the then board of Satyam had to be suspended. Second, a new board with persons of the highest credibility and competence (had to be appointed), and third, the new government-appointed board and the government itself would need to work together very closely to make it work.

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The Satyam Scam

MAHINDRA SATYAM
Mahindra Satyam (formerly known as Satyam Computer Services Ltd) was founded in 1987 by B Ramalinga Raju. The company offers consulting and information technology (IT) services spanning various sectors, and is listed on the New York Stock Exchange, the National Stock Exchange (India) and Bombay Stock Exchange (India). In June 2009, the company unveiled its new brand identity Mahindra Satyam subsequent to its takeover by the Mahindra Groups IT arm, Tech Mahindra. Tech Mahindra Ltd. Placed the highest bid to acquire Satyam Computer Services Ltd. On 13 April 2009. This is just over four months after the massive accounting scandal was made public when the founder, Ramalinga Raju, confessed to inflating the books to over $1 billion above their worth. The takeover bid is only a month after Satyam announced it was up for sale. Tech Mahindra bid Rs 58 per share, above what Larsen & Toubro and billionaire tycoon Wilbur Ross offered. Tech Mahindra will own 31% of the IT mammoth at a cost of Rs1,757 crore, or slightly more than US $350 million. It looks like Mahindra got a bargain considering the firm is worth a reported $2.1 billion. Who knows what the real value is, but its surely more than Rs 1,757 crore for almost a third of the firm, commented Francesco Gopalakrishnan, EconomyWatch correspondent. But then again, with the publics suspicions up about accounting and auditing mishaps in Indian IT firms, they would have to get a deal to take over this scarred firm, he added. Itll be a long, hard, road to build back the confidence and the trust of the investors, clients, shareholders etc.. When the Satyam scandal hit the presses in early January this year, rumors and suspicions about Indias IT Industry spread like wildfire. I didnt think I could get any more business for a long, long time, lamented Ishan Singh, the owner of a small business process outsourcing (BPO) firm in Hyderabad. The Satyam board selected Tech Mahindra through a global competitive bidding process launched by the company on 9th march, 2009, which was designed in accordance with the orders of the Company 28 | P a g e

The Satyam Scam Law Board, approved by the Securities & Exchange Board of India and conducted under the supervision of Justice-Bharucha. After evaluating the financial and technical bid of each bidder, the board and Justice Bharucha ranked the bidders based on the price. The result illustrated Tech Mahindra to be the highest bidder. Furthermore, the board also deemed this company's bid to be satisfactory and in the interests of Satyam computers. When TM was declared as the highest bidder, it entered into a share subscription agreement with the company. According to this, TM has agreed to subscribe and acquire 30,27,64,327 shares of Satyam. It has also agreed to infuse Rs 1756 crores as an initial amount into the company. TM is to deposit the initial subscription amount in accordance with the Takeover Regulations in the separate escrow accounts on or before the date of 21st of April 2009. If Tech Mahindra desires to take control of the affairs of the company simultaneously with the preferential allotment then it will be required to deposit in the escrow accounts, the total funds necessary to consummate the public offer. The preferential allotment is subject to fulfilment of certain conditions and obtaining the required regulatory approvals, including approvals from the Company Law Board and the SEBI. In the event of Tech Mahindra failing to deposit the total acquisition Funds on or before April 21st , 2009, the next highest bidder will be considered as the highest bidder and the details will be announced by the board. In accordance with the SEBI Takeover regulations act of 1997, Tech Mahindra will be obligated to submit a mandatory cash tender offer in order to obtain an additional minimum amount (amounting to 20 percent) of the enhanced share capital and convertible instruments. Tech Mahindra plans to extend its ownership up to 51% by purchasing an additional 20% at the same value. This brings Satyams valuation in Mahindras eyes to $1.1 billion. Tech Mahindra bid 20% more than the next-highest bidder and more than double of that of the lowest bidder. Satyam has offices in a dozen countries and employs 40,000. It has more than 650 clients around the world, and one eighty five of them are from the Fortune five hundred corporations. Tech Mahindra is an Indian conglomerate famous for its SUVs, tractors, and financial services. This foray into IT and outsourcing demonstrates the firms eagerness to diversify and expand. During a news conference on Monday, Tech Mahindra Chairman Anand Mahindra explained the synergy the two firms could create, Both companies can benefit from each other, he said. Satyam provides a partner which is almost completely complimentary, agreed Vineet Nayyar, vice chairman of the corporation Tech Mahindra in a newspaper interview. Tech Mahindra was comfortable placing such a high bid in part because it and Satyam have almost no overlap. The bulk of Tech Mahindras software business is in telecommunications, a sector in which the Satyam corporation has largely kept out of.

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The Satyam Scam Furthermore, in excess of 70% of Satyams business is in the US, providing additional diversification for Tech-Mahindra. The option of subscribing to additional and newly issued shares will be resting with Tech Mahindra. The process of acquiring of these shares will be through the methods of preferential allotment and initial public offerings. The subsequent preferential allotment will not be more than 51 percent of the enhanced share capital. This will be in effect after the issuance of additional shares. As of now, even when the Satyam deal has been finalized, Satyam chairman Kiran Karnik wants to quit the board at the earliest possible moment and he also stated that he wanted the new owner to have his own style of 'running the show'. Meanwhile, the share market was topsy turvy too, with the take over of Mahindra over Satyam. The shares of Tech Mahindra were trading 13 per cent higher at about Rs 364 levels, while the shares belonging to Satyam flared up by over 8 per cent to Rs 50.tt whenever mergers or acquisitions are made, job cuts will occur. And considering Satyams profit margins are below 3%, Tech Mahindra intends on even more cuts to increase profits. But some are skeptical considering the lack of common ground the firms share. There doesnt seem to be any common thread of synergy, said Edelweiss Securities analyst Viju George. However, the CEO of Satyam, A. S. Murty, was certainly thankful for this renewal, I would like to compliment each of the Satyamites and their families for standing together and with unflinched support, taking care of all our deliverables to our customer We welcome the change and we make sure that all our stakeholders are completely delighted.In addition to other controversies involving Satyam, on January 7, 2009, Chairman Raju resigned after publicly announcing his involvement in a massive accounting fraud. Ramalinga Raju is currently in a Hyderabad prison along with his brother and former board member Rama Raju, and the former CFO Vadlamani Srinivas. The Mahindra Satyam corporation has achieved a few milestones till date, some of them are like on Feb 11, 2010 Mahindra Satyam, announced that it had entered into a partnership with the Integr8 Group, Africas largest privately owned ICT service and solutions provider, which will significantly increase the delivery and service offerings of both companies. This partnership will enable clients from both companies to experience a host of new services in the consulting and infrastructure managementspace. This partnership allows both companies to provide value to customers in the South African market said Rob Sussman, Joint CEO of the Integr8 Group. Synergies in strategy, complementary consulting skills, similarity of global vision and a deep commitment to achieve excellence in execution are some of the reasons why Integr8 IT chose to partner with Mahindra Satyam added Sussman. Mahindra Satyams deep expertise in the ICT Strategy, Program Governance, Portfolio Management 30 | P a g e

The Satyam Scam and Service Delivery space coupled with the impressive pedigree of Integr8 IT in the South African market will help this partnership to offer a wide range of high quality, complementary technology solutions to address the business needs of our customers. Speaking on the occasion, Mahindra Satyams Business Head for the African region, Bhaskar Ramani said We are delighted with this new partnership as the expertise and experience of Integr8 will help us broaden our service offering and provide innovative solutions to our customers in the South African market. South Africa has immense potential and is a growing economy offering numerous advantages. The availability of trained manpower is an added benefit. Secondly Mahindra Satyam is the first Indian company to join FIFA as the Official IT Services Provider for the 2010 FIFA World Cup, South Africa. Mahindra Satyam was entrusted with the responsibility of developing the core IT event management system for FIFA and the Local Organizing Committee of South Africa.As part of this partnership, Mahindra Satyam developed the Event Management Solutions system with various software modules focusing on specific areas such as Accreditation, Transportation, Volunteer Management and Space & Material Management. The Mahindra Satyam team developed solutions that enriched the experience of all fans arriving in the stadiam to watch the 64 matches and ensured seamless movement of all the delegates, staff and volunteers. Additionally, these solutions were available at the right place and the right time, leaving a lasting impression in the world of sports and a legacy in South Africa. This demonstrated Mahindra Satyams technology prowess to enhance the FIFA World Cup experience from the end-user perspective.Mahindra Satyam developed Extranets and the Intranet for FIFA. Software services provider Satyam Computer Services Ltd unveiled its new brand identity, Mahindra Satyam, symbolising the amalgamation of the Mahindra Group's values with Satyam's expertise. "This rebranding exercise symbolises an amalgamation of the Mahindra Groups values with Satyams fabled expertise, even as it retains that part of Satyams identity which signifies commitment, purpose and proficiency of the organisation and its people," Mahindra Group Vice-Chairman and Managing Director Anand Mahindra said. The logo for the new brand would be adopted from the Mahindra Group, a company statement said. The "Mahindra Satyam" brand would be based on values such as good corporate citizenship, professionalism, customer first, quality focus, and the dignity of the individual, the statement further added. "With this initiative, we will witness steps by the Management to adopt and inculcate the values of performance and customer first, good corporate governance and citizenship, which are drawn from the Mahindra Group," Satyam Board Executive Vice-Chairman Vineet Nayyar said.

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The Satyam Scam Mahindra Satyam ADR slides 25% on delist move

Mahindra Satyam (erstwhile Satyam Computer Services Ltd) announced its intent to delist its American Depositary Receipts (ADRs). Meanwhile, in reaction to the delisting plans, the ADR of Satyam Computer tumbled 24.5 per cent to $4.62 at 8.00 p.m. IST at the NYSE. The counter, on Thursday, surged 20 per cent to close at $6.61.The company said in a press release that it has notified the New York Stock Exchange (NYSE) of its decision.In accordance with the rules and regulations of the US Securities and Exchange Commission (SEC), the company fulfilled the necessary filings on October 4.Mahindra Satyam delisting of its ADRs from the NYSE was effective on October 14. Post the delisting, the ADRs have continued to trade in the over-the-counter (OTC) market, it hoped. In addition, throughout this period and in the future the equity shares underlying the ADRs will continue to be listed on the principal Indian stock exchanges the Bombay Stock Exchange and the National Stock Exchange.Commenting on the planned move to OTC trading, Mr Vineet Nayyar, Chairman, Mahindra Satyam, said: Due to our late SEC filings, which are among the unfortunate results of the misdeeds of former management, we are delisting from the NYSE. Their objective is to enable the ADRs to be quoted without interruption in the US domestic OTC market so that the investors can continue to trade ADRs throughout the transition period and beyond. The company was late in filing its annual report on Form 20-F for the year ended March 31, 2009. It was notified by the NYSE of its non-compliance.Pursuant to the NYSE's rules, the company was given until October 15, to make this filing, as previously announced, which represents the maximum time period available.The release said the company did not anticipate that it will be able to file restated US GAAP financial statements for the period ended March 31, 2009 on or prior to the October 15, 2010 compliance date in accordance with the NYSE's rules.

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The Satyam Scam

SATYAMS NEW MANAGEMENT

On 5 February 2009, the six-member board appointed by the Government of India named A. S. Murthy as the new CEO of the firm with immediate effect. Murthy, an electrical engineer, has been with Satyam since January 1994 and was heading the Global Delivery Section before being appointed as CEO of the company. Murty has seen Satyam grow from less than 100 associates to more than 50,000 associates. Currently, he is responsible for Delivery Excellence (in his capacity as Chief Delivery Officer) and also Leadership Development. As part of Leadership Development, ASM integrates Satyam's Real Time Leadership Center and Satyam Learning World. He is also responsible for the optimal utilization of Human Resources. Prior to this, he played several key roles (like Head - Human Resources, Head Insurance vertical etc). AS Murthy reviews all Asset Businesses (Support processes and Service Offerings) at Satyam. His mission is to enable ordinary people perform extraordinary tasks through right orientation, process-centric approaches and continual learning. The two-day-long board meeting also appointed Homi Khusrokhan (formerly with Tata Chemicals) and Partho Datta, a Chartered Accountant as special advisors. Homi R Khusrokhan has rich experience in leading very large companies, across various industries. He retired as Managing Director, Tata Chemicals in December 2008 and prior to that was the Managing Director of Tata Tea. Before joining the Tata Group in 2001, Khusrokhan worked for Glaxo Laboratories (India) for 29 years, and held the role of Managing Director of both Glaxo and Wellcome (India). He has been the President of the Organization of Pharmaceutical Producers of India and Vice President of the Bombay Chamber of Commerce and Industry. He continues on the Boards of several Tata Companies in a non-executive capacity. Partho S. Datta is a Chartered Accountant, with over 33 years of corporate experience. His work experience started with Dunlop India Limited. Later he joined Indian Aluminium Company 33 | P a g e

The Satyam Scam Limited (Indal) where he worked in various functions including in the parent company of Indal in Canada, before becoming the Director and Chief Financial Officer of Indal. In 1998, he joined the Murugappa Group of Chennai as Group Director Finance and a member of the Group Supervisory Board. The Group won the prestigious World Family Business award during his tenure and also saw significant advances in corporate governance and professionalization of an Indian business house promoted group. He has been involved with industry associations at both national and regional levels and has been involved with several companies as a non-executive director.

Experts tracking the company say attrition among key staff remains a top worry for Mahindra Satyam.Our interactions reveal that many of these executives are pursuing the most precious resources in Mahindra Satyam: client engagement managers and delivery owners (direct reports of some of these execs when they worked in Satyam), Forrester analyst Sudin Apte said in his report on Mahindra Satyams performance earlier this year. A majority of the top executives who pronounced their commitment to the beleaguered company in January 2009 have since left and the company is now attempting to hire top talent, he added. Over the past few months, Satyam has lost a lot more than clients both employees and business heads. Virender Aggarwal, who used to head Satyams AsiaPacific business, quit to join HCL Technologies . TR Anand, who used to head the telecom and infrastructure business, decided to retire . And, Keshab Panda, head of Europe operations, quit to head L&Ts integrated engineering services arm. However, a year later, the company survives albeit as Mahindra Satyam under its saviour, the tractors-to-software Mahindra group. Though the challenges of nursing a stricken company to health are by no means over, the company, under the new management, seems to have more than weathered the storm and its future as a going concern appears assured. The company has been able to even increase its client base and chart a fresh course, despite the rough weather it faced over the months. The newly constituted board hired KPMG and Deloitte to start the long task of restating the accounts, which is expected to be completed in the first half of 2010. The board then set about dousing the fires. Employee salaries were on the top of the list of priorities of the new board as they set about revamping the stricken company. The board appealed to clients to pay receivables early and arranged bank loans. Tech Mahindra, which was finally chosen to take over the company, was an early bidder. Chander Prakash Gurnani, chief executive of Mahindra Satyam took over at Satyam because of his industry experience, especially with mergers and acquisitions. Mahindra & Mahindra beat Larsen & Toubro and US investment company Wilbur Ross with a bid worth $585 million. Since he took over, Gurnani has been 34 | P a g e

The Satyam Scam focusing on healing wounds. Though some big clients left since the Satyam sale, others were added. The new management won over as many as 35 new clients to bring the total to 180. The company is now 'cash flow positive', according to Gurnani. Meanwhile, for Gurnani, one of the tasks that remains is to remove the last traces of the Ruju legacy from the Satyam name - a plush suite used by Raju, which he plans to convert into a software development centre at a later date. Three independent directors resigned from the Satyam board, in addition to the IT company's oldest director, Mangalam Srinivasan, who had resigned on Christmas Day taking moral responsibility for the ill-fated Satyam-Maytas deal Satyam said three more independent directors, Krishna Palepu, Vinod Dham and Mendu Rammohan Rao, had quit. Palepu and Dham's resignations were effective , while Rao's came into effect from the next week then. Effectively, the nine-member board was reduced to five - three whole-time directors that includes chairman B Ramalinga Raju, managing director B Rama Raju and company president Ram Mynampati. The remaining two independent directors are former IIT director V S Raju and former union cabinet secretary T R Prasad, who would also leave. The company had announced that the meeting of its board of directors due to have been held had been cancelled and then was rescheduled to 10 January, 2009, to allow the board to consider additional options The board had been expected to consider a share buyback at the Monday meeting, but news last week that the outsourcer had been barred from doing business with the World Bank added to its woes. Experts tracking the company say attrition among key staff remains a top worry for Mahindra Satyam.Our interactions reveal that many of these executives are pursuing the most precious resources in Mahindra Satyam: client engagement managers and delivery owners (direct reports of some of these execs when they worked in Satyam), Forrester analyst Sudin Apte said in his report on Mahindra Satyams performance earlier this year. A majority of the top executives who pronounced their commitment to the beleaguered company in January 2009 have since left and the company is now attempting to hire top talent, he added. Over the past few months, Satyam has lost a lot more than clients both employees and business heads. Virender Aggarwal, who used to head Satyams AsiaPacific business, quit to join HCL Technologies . TR Anand, who used to head the telecom and infrastructure business, decided to retire . And, Keshab Panda, head of Europe operations, quit to head L&Ts integrated engineering services arm.

Mahindra Satyam's Manish Mehta joins Capgemini- Manish Mehta , the chief delivery officer of Mahindra Satyam and one of the top management staff helping the company recover from the Satyam 35 | P a g e

The Satyam Scam financial fraud, is set to join multinational rival Capgemini , he confirmed to ET. Mr Mehta, who was earlier leading Satyams SAP and managed testing practice, was promoted by the company to lead its delivery operations across Europe, APac, Middle East and Africa. When contacted by ET , he confirmed that he has been serving the notice period at Satyam, but declined to elaborate any further. Company officials familiar with this development said many others from different project teams could join Mehta at Capgemini. A company spokeswoman declined to offer comments. A 28-year industry veteran, Mehta spent 15 years at Tata Consultancy Services (TCS) helping the company establish its Germany and European operations.

CHAPTER NO. 5 THE CORPORATE GOVERNANCE ISSUE AT SATYAM

When terrorists attacked Mumbai last November, the media called it "India's 9/11." That tragedy has been succeeded by another that has been dubbed "India's Enron." In one of the the biggest frauds in India's corporate history, B. Ramalinga Raju, founder and CEO of Satyam Computers, India's fourthlargest IT services firm, announced on January 7 that his company had been falsifying its accounts for years, overstating revenues and inflating profits by $1 billion. Ironically, Satyam means "truth" in Sanskrit, but Raju's admission accompanied by his resignation shows the company had been feeding investors, shareholders, clients and employees a steady diet of asatyam (or untruth), at least regarding its financial performance. Raju's departure was followed by the resignation of Srinivas Vadlamani, Satyam's chief financial officer, and the appointment of Ram Mynampati as the interim CEO. In a press conference held in Hyderabad on January 8, Mynampati told reporters that the company's cash position was "not encouraging" and that "our only aim at this time is to ensure that the business continues." A day later, media reports noted that Raju and his brother Rama (also a Satyam co-founder) had been arrested and the government of India disbanded Satyam's board. Though control of the company will pass into the hands of a new board, the government stopped short of a bailout it has not offered Satyam any funds. Meanwhile, a team of auditors from the Securities and Exchange Board of India (SEBI), which regulates Indian public companies, has begun an investigation into the fraud. Since Satyam's stocks or American Depository Receipts (ADRs) are listed on the Bombay Stock Exchange as well as the New York Stock Exchange, international regulators could swing into action if they believe U.S. laws have

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The Satyam Scam been broken. At least two U.S. law firms have filed class-action lawsuits against Satyam, but given the company's precarious finances, it is unclear how much money investors will be able to recover. Satyam is the fourth largest Indian It company and it has been known as the one of the best Indian IT companies to work with and it has risen past several companies to bag several projects. It's revenues were in the range of 10,000 crores a year and has a roster of about 650 clients all over the world who used to offshore their work to Satyam. 10000 crores will mean about 2 billion dollars or rather more based on the valuation of the rupee. This companies founder is Mr. Ramalinga Raju who in a letter to the Board of Directors said that he has for the past seven years overstated the accounts and that the total profit margin of the company is only 3% even though he has been fraudulently showing a profit margin of about 25%. That means he was showing a cash at hand I mean in the bank accounts to be 5000 crores about a billion dollars whereas the cash is only 640 crores or even less in the accounts. That letter caused a stir and the jobs of about 55000 employees is at stake as well as the the whole future of the company is at stake. The outrage over Raju's admission of systematic accounting fraud has broadened to wider concern about the potential damage to India's appeal for foreign investors and the IT services industry in particular. Immediately following Raju's confession, Satyam's shareholders took a direct hit as the company's share price crashed 77% to Rs. 30 (approximately 60 cents), a far cry from its 52-week high of Rs. 544 ($11.35) last May. Jitendra Singh, a Wharton management professor who is currently dean of the Nanyang Business School in Singapore, believes Satyam is an "outlier" and that there is no reason to think that "problems of this kind may be much more extensive than one company or a handful of companies." However, he adds, "foreign investors will look a little more askance at accounting data from India. And that may not be a bad thing." Useem also warns against overreacting. "Don't assume other firms are guilty," he says. But he considers the situation to be an "alerting call" for investors to check where their money is, and for auditors and independent directors in all major firms to take a look at the books. Corporate India has tried to contain the damage so far. Rajeev Chandrasekhar, president of the Federation of Indian Chambers of Commerce and Industry, called upon regulators "to move quickly to demonstrate that this is an exceptional case among corporations, and that investors need not worry about Indian corporate governance and accounting standards." Suresh Surana, founder of RSM Astute Consulting Group, said in a statement that the Satyam development is "a major eye opener and will bring into renewed and

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The Satyam Scam critical focus the role of independent directors, auditors, company management, [the] CFO and other key persons involved" He said. Raju acknowledged that Satyam's balance sheet included Rs. 7,136 crore (nearly $1.5 billion) in non-existent cash and bank balances, accrued interest and misstatements. It had also inflated its 2008 second quarter revenues by Rs. 588 crore ($122 million) to Rs. 2,700 crore ($563 million), and actual operating margins were less than a tenth of the stated Rs. 649 crore ($135 million). Notwithstanding Raju's confession, the Satyam episode has brought into sharp relief the role and efficacy of independent directors. SEBI requires Indian publicly held companies to ensure that independent directors make up at least half their board strength. The knowledge available to independent directors and even audit committee members is inherently limited to prevent willful withholding of crucial information, Singh notes. "The reality is, at the end of the day, even as an audit committee member or as an independent director, I would have to rely on what the management was presenting to me," he says, drawing upon his experience as an independent director and audit committee member at Fedders, a publicly held company in the U.S. that filed for bankruptcy last year. "It is the auditors' job to see if the numbers presented are accurate." Satyam's auditor PricewaterhouseCoopers issued a terse statement: "Over the last two days, there have been media reports with regard to alleged irregularities in the accounts of Satyam.. Price Waterhouse are the statutory auditors of Satyam. The audits were conducted by Price Waterhouse in accordance with applicable auditing standards and were supported by appropriate audit evidence. Given our obligations for client confidentiality, it is not possible for us to comment upon the alleged irregularities. Price Waterhouse will fully meet its obligations to cooperate with the regulators and others." The Irony was that the Golden Peacock award was given to Satyam for its corporate governance standards. This is the irony of the situtaion that a company which was considered the best in IT industry has such low corporate governance standards. On top it the Board of Directors were not even apprised of even anything. In fact it seems even the CFO was not sure about a lot of things ! talk about corporate governance. Corporate Governance as defined is " Corporate governance refers to the legal and factual framework of the management and monitoring of companies. Corporate governance regulations are geared towards transparency and thus strengthen the trust in management and control focusing on value creation" The big question is that why such a person would commit such a fraud. The psychologists would of course give a different answer but the only answer is greed. In this case it was greed for money 38 | P a g e

The Satyam Scam as the land price were going high so he and his son opened up a company by the name of MAYTAS and made sure that all the funds were diverted there. Then he used his political connections to make sure that he got good projects for infrastructure development and that means that he will able to grab more land. In fact he is supposed to be the 10th biggest land owner in the country. In the end he had to disclose because there was no way he could fund to many projects and also he had pledged his shares in the company to get money but then the stock market tanked and he had no means to do give out more money and hence was left with no option but to disclose.

MAYTAS
Maytas ("Satyam" read backwards) refers to a group of companies founded by B. Ramalinga Raju. It includes Maytas Properties and Maytas Infra Limited. Maytas Infra Limited An infrastructure development, construction and project management company. Maytas Infra was originally run by Satyam Computer Services founder B Ramalinga Raju. It came under the scanner due to its association with B. Ramalinga Raju. Various agencies, including the state Crime Investigation Department, probed the Maytas affair after B Ramalinga Raju admitted to serious financial scam in Satyam Computer. Also, there were allegations that funds from Satyam were diverted to Maytas, causing the Government agencies to verify the infrastructure companys records as well. Maytas Infra later requested for an extension of its quarterly results due to these investigations.In August 2009, IL&FS replaced B Ramalinga Raju as promoter of Maytas Infra. The Satyam scam-hit Maytas Infra has achieved yet another major feat as part of the process of coming out of financial troubles. It has hypothecated inter-corporate deposits (ICDs) worth Rs391 crore that now are part of a controversial transaction with a consortium of bankers. A major part of the ICDs about Rs323 crore were given out to front companies promoted by B Ramalinga Raju, the tainted founder of Satyam. Maytas, under the new management led by IL&FS, has been claiming that it has enough evidence to prove that the funds raised by the front companies through ICDs were routed to Satyam and it would work on recovering that money from the IT company since the actual borrowers identity is doubtful. Meanwhile, Maytas has decided to hypothecate the controversial ICDs with the

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The Satyam Scam consortium of banks working along with the troubled infrastructure company in finalising the debt restructuring. Maytas Properties A property development company founded in 2005. The Ernst & Young is the statutory auditor of Maytas Properties. It was run by Mr. B Ramalinga Raju . The Hyderabad police has registered cheating and criminal breach of trust cases against the promoters of Maytas Properties, an unlisted company owned by the family of Satyam Computer Services Ltd founder B Ramalinga Raju, who is in jail after confessing to manipulating Satyams accounts.Speaking to Business Standard, Deputy Commissioner of Police (Detective) R S Praveen Kumar said the police registered the cases yesterday following a complaint from a member who bought property at Hill County, Bachupally, a residential project promoted by Maytas Properties on the outskirts of the city. The complainant told the police that he paid about Rs 77 lakh to buy the property and the company promised to deliver it in March 2008 but did not do so, citing the crash in the real estate market. People who bought flats at Hill County have been on the warpath for some weeks now since pressure from their monthly loan instalments was building up. They have held demonstrations at the construction site, at Rama Rajus residence and also staged a hunger strike in protest against the delay.Hill County is a Rs 1,100-crore project out of which the company has collected Rs 654 crore by selling residential property. It currently has Rs 100 crore as receivables and Rs 200 crore as vendor liabilities. The project envisaged construction of 840 apartments and 326 independent villas. The flats were priced between Rs 50 lakh and Rs 1.5 crore, while the price of villas ranged from Rs 1.5 crore to Rs 2.5 crore. Last week, the companys government-appointed director Ved Jain announced that it was looking at parting with a stake in the residential project. After the 2009 Satyam accounting scandal After B Ramalinga Raju admitted Satyam scam, the Maytas stock slumped to a 52-week low on 9 January 2009.In wake of the Satyam scam, the Citizens for a Better Public Transport in Hyderabad (CBPTH) demanded a CBI inquiry into the process of how Maytas bagged the Hyderabad Metro Rail project. The CBPTH convener C Ramachandraiah alleged that the state government had been favouring Maytas for infrastructure projects. The Economic Times reported that the Andhra Pradesh government has had paid Rs. 1,800 crore to Maytas Infra towards works under the irrigation department's Jalayagnam project. The major irrigation minister Ponnala Lakshmaiah said that works totalling another Rs 11,000 crore had been sanctioned to Maytas Infra, since Y S Rajasekhara Reddy took as the chief 40 | P a g e

The Satyam Scam minister in 2004. Maytas Infra-led consortium failed to achieve financial closure and give performance guarantee, the state government of Andhra Pradesh was on Tuesday forced to end its unprecedented generosity and cancel the concession agreement with the group on the Rs 12,132-crore Hyderabad Metro Rail project.On July 21, 2009, a case was registered by the Hyderabad police under Section 406 (breach of trust) and Section 420 (cheating) of the Indian Penal Code In 2010.

Satyam-Maytas deal: A mockery of Corporate Governance Though under pressure from Mutual Funds and minority stakeholders, Indias fourth largest software company Satyam Computer has finally called off the decision to purchase 51 per cent stake in Maytas Infrastructure and 100 per cent stake in Maytas properties but it has raised serious issues which otherwise was not seen in Indian Inc. Issues of corporate governance arises due to this failed attempt of the deal is most serious. Corporate governance, the word which is probably least understood by retail investors and which is fine read by top brasses of companies has made its importance felt less than a decade back when big iconic names like Enron Corporation and World Com were enmeshed in the history as their top management has grossly ignored the concept of corporate governance. In simple term corporate governance is about promoting corporate fairness, transparency and accountability. Corporate governance makes the whole structure of the company more accountable towards each stakeholder, whether it is majority or minority. Practice of corporate governance is to make the proper disclosure to the stakeholders about each strategic decision so that stakeholders and market can reward the good decisions and punish the bad decisions. So in fact if any company is following the proper corporate governance practices it works as correcting mechanism for the company in case of wrong decisions and helps the company to take corrective life saving action within time. So the question here would be how can the attempt of CEO of Satyam computer, Ramalinga Raju, to purchase the twin company Maytas infra and Maytas properties be regarded as an attempt to made mockery of the principles of corporate governance - First of all, the decision was not announced taking into confidence all the stakeholders of the company. Secondly, the twin Maytas companies are being the 41 | P a g e

The Satyam Scam companies run by the family members of Ramalinga Raju only and it was told that his two sons are major interested party in the twin companies. Thirdly, the deal would have made the cash reach company Satyam into a debt ridden company as its entire holding of $1.3 billion cash would have gone to Maytas Properties (where promoters were 100 per cent holding) and in Maytas Infrastructures. Fourthly, Ramalinga Raju was holding only 8.5 per cent stake of Satyam computer so how can he take decisions of transferring its cash to a company owned by his son without asking the rest of the 91.5 per cent stake holders? Fifthly, in the name of diversification from software to entirely new area of reality why has a relatively new company Maytas been chosen when several other big players are still there? Sixthly, is it really time to go for shopping in a sector where the economic slowdown is at its severest form. If you leave the bad performance due to recession, since every industry is suffering out of which, the failed deal of Satyam-Maytas is the story of how anybody having a stake of just over 8.5 per cent stake can ignore the interest of fragmented share holders who account for 91.5 per cent.So where is the fairness when you are not wanting to bring the resolution in the EGM as you know that it can not get passed in the EGM and announcing the decision almost unilaterally on the ground that one is a majority (8. 5 per cent) stake holder. So the other issue would be about the transparency when ones action suggests that he is trying to make a company sitting on cash into a debt ridden company ignoring the interest of rest of stakeholders. And where is the accountability when you are not scared of shareholders and dare to overlook the interest of minority stake holders who actually are the majority shareholders in the company? In short, the entire episode of attempt to purchase of Maytas by Satyam was nothing but making mockery of the concept of corporate governance in India, the very definition of which i.e. fairness, transparency and accountability has failed here. Already shaken, Indian software industry is working under tremendous pressure owing to worldwide recession and such an act of a leading software company is going to give a signal to the market that for these soft companies future is not as rosy as of their golden age of previous few years, at least not in near future. Meanwhile, shareholders of Satyam are in confused state about the future of the company, whether company will remain a software company or whether it will migrate into such a domain where software business will not be major earning player for Satyam? Almost 30 per cent loss of share price in India and above 50 per cent abroad (ADR) lately confirmed the confused status of investors of Satyam. By the way, Satyam and Maytas are alter-egos only if one reads Satyam from right to left you will find Maytas only.

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The Satyam Scam

RAMALINGA RAJUS RESIGNATION LETTER

Here is Satyam Chairmans Resignation LetterTo the Board of Directors, Satyam Computers Services Ltd. From B. Ramalinga Raju, Chairman, Satyam Computer Services Ltd Dear Board Members, It is with deep regret, and tremendous burden that I am carrying on my conscience, that I would like to bring the following facts to your notice: 1. The balance sheet carries as of September 30, 2008 a) Inflated (non-existent) cash and bank balance of Rs 5,040 Cr. (as against Rs 5361 crore refglected in the books) b) An accured interest of Rs 376 crore which is non-existent c) An understated liability of Rs 1,230 crore on account of funds arranged by me d) An over stated debtor position of Rs 490 crore (as against Rs 2651 reflected in the books)

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The Satyam Scam 2. For the September quarter (Q2) we reported a revenue of Rs 2,700 crore and an operating margin of Rs 649 crore (24 per cent of revenues) as against the actual revenues of Rs 2,112 crore and an actual operating margin of Rs 61 crore (3 per cent of revenue). This has resulted in artificial cash and bank balances going up by Rs 588 crore in Q2 alone. The gap in the balance sheet has arisen purely on account of inflated profits over a period of last several years (limited only to Satyam standalone, books of subsidiaries reflecting true performance). What started as a marginal gap between actual operating profit and the one reflected in the books of accounts continued to grow over the years. It has attained unmanageable proportions as the size of the company operations grew significantly (annualized revenue run rate of Rs 11,276 crore in the September quarter, 2008 and official reserves of Rs 8.392 crore). The differential in the real profits and the one reflected in the books was further accentuated by the fact that the company had to carry additional resources and assets to justify higher level of operations thereby significantly increasing the costs. Every attempt made to eliminate the gap failed. As the promoters held a small percentage of equity, the concern was the poor performance would result in a takeover, thereby exposing the gap. It was like riding a tiger, not knowing how to get off without being eaten. The aborted Maytas acquisition deal was the last attempt to fill the fictitious assets with real ones. Maytas investors were convinced that this is a good divestment opportunity and a strategic fit. Once Satyams problem was solved, it was hoped that Maytas payments can be delayed. But that was not to be. What followed in the last several days is common knowledge. I would like the board to know: 1. That neither myself, not the Managing Director (including our spouses) sold any shares in the last eight years-excepting for a small proportion declared and sold for philanthropic purposes. 2. That in the last two years a net amount of Rs 1,230 crore was arranged to Satyam (not reflected in the books of Satyam) to keep the operations going by resorting to pledging all the promoter shares and raising funds from know sources by giving all kinds of assurances (Statement enclosed, only to the members of the board). Significant dividend payments, acquisitions, capital expenditure to provide for growth did not help matters. Every attempt was made to keep the wheel moving and to ensure prompt 44 | P a g e

The Satyam Scam payment of salaries to the associates. The last straw was the selling of most of the pledged share by the lenders on account of margin trigger. 3. That neither me, nor the Managing Director took even one rupee/dollar from the company and have not benefitted in financial terms on account of the inflated results. 4. None of the board members, past or present, had any knowledge of the situation in which the company is placed. Even business leaders and senior executives in the company, such as Ram Mynampati, Subu D T R Anand, Kesab Panda, Virender Agarwal, A S Murthy, Hari T, S V Krishnan, Vijay Prasad, Manish Mehta, Murali V, Sriram Papani, Kiran Kavale, Joe Lagioia. Ravindra Penu Metsa, Jayaraman and Prabhakar Gupta are unaware of the real situation as against the books of accounts. None of my or managing directors immediate or extended family members has any ideas about these issues. Having put the facts before you, I leave it to the wisdom of the board to take the matters forward. However, I am also taking the liberty to recommend the following steps: 1) A task force has been formed in the last few days to address the situation arising out of the failed Maytas acquisition attempt. This consists of some of the most accomplished leaders of Satyam: Subu D, T R Anand, Keshab Panda and Virender Aggarwal, representing business functions, and A.S.Murthy, Hari T and Murali V representing support functions. I suggest that Ram Mynampati be made the Chairman of this task force to immediately address some of the operational matters on hand. Ram can also act as an interim CEO reporting to the board. 2) Merrill Lynch can be entrusted with the task of quickly exploring some merger opportunities. 3) You may have a restatement of accounts prepared by auditors in light of the facts that I have placed before you. I have promoted and have been associated with Satyam for well over twenty years now. I have seen it grow from few people to 53,000 people, with 185 Fortune 500 companies as customers and operations in 66 countries. Satyam has an excellent leadership and competency base at all levels. I sincerely apologize to all Satyamites and stakeholders who have made Satyam a special organization, for the current situation. I am confident they will stand by the company in this hour of crisis. 45 | P a g e

The Satyam Scam

In light of the above, I fervently appeal to the board to hold together to take some important steps. Mt T R Prasad is well placed to mobilize support from the government at this crucial time. With the hope that members of the Task Force and the financial advisor, Merrill Lynch (now Bank of America) will stand by the company at this crucial hour, I am marking copies of this statement to them as well. Under the circumstances, I am tendering my resignation as the chairman of Satyam and shall continue in this position only till such time the current board is expanded. My contribution is just to ensure enhancement of the board over the next several days or as early as possible.

RAJU RAMALINGAS COURT PROCEEDINGS

In Andhra pradesh, a Hyderabad city court had begun hearing the arguments on aug 24 th 2010 of the accused over the CBI charges in the multi-crore Satyam Scam case. The prime accused B Ramalinga Raju made a brief appearance in the court that day for the first time after the high court granted him bail last week. The Supreme Court has issued notices to Ramalinga Raju and four others accused in Satyam Fraud Case on Monday. The notice has been issued after the CBI approached the apex court challenging the Satyam founders release on bail. The Supreme Court bench comprising Justice Deepak Verma and Justice Dalbeer Bhandari has also served notices to Rama Raju, brother of Ramalinga Raju and former managing director of Satyam, and two other persons on a petition filed by CBI. He had been taking exemption from appearing before the court during the trail of Satyam accounting fraud case since September last year on health grounds. While, granting bail, the high court had ordered him to appear before the trial court once he was discharged from the hospital, where he is seeking treatment for liver infection.

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The Satyam Scam Satyam scam accused Ramalinga Raju spoke for the first time after being out on bail. Clad in a simple white shirt and brown trousers, an unshaven and feeble Mr Raju walked silently into the CBI Special Court here on Thursday, much before the arrival of the magistrate and responding to greetings from a few journalists and lawyers with a warm smile and a hand shake.When asked to comment on the changes in the Satyam management and its business performance, Mr Raju told Business Line that he did not want to comment on the issue at this point of time.My current focus is on health monitoring blood pressure and blood count, among many other things, he said. On obtaining bail from the High Court last week, he said, I am feeling good and better.Mr Raju, who is undergoing treatment for Hepatitis C' at the Nizam's Institute of Medical Sciences (NIMS) was accompanied by a doctor. After marking his presence in the court before the magistrate, he returned to the hospital.Mr Raju, who earlier travelled only in his favourite blue Mercedes Benz car, arrived in court in a Hyundai SUV and was escorted back to his car by gun-wielding cops, who were stationed in the court premises for the purpose. The case was adjourned for the next hearing on Friday. He appears at local court, accompanied by a doctor in Hyderabad on Thursday. This is his second appearance after being granted bail by Andhra High Court.Raju hasnt made any appearance for questioning in court since the trial stated he was diagnosed with hepatitis-C. I m fine now , procedure unduly extended. Im recovering now. Bail is a good relief, said Raju.Raju was granted bail in the multi-crore scam by Andhra Pradesh High Court on August 18, 2010. The High Court granted bail to Raju on health grounds saying he should not be discharged from the hospital. Raju had been hospitalised at Nizams Institute of Medical Sciences in Hyderabad for treatment of Hepatitis C and other ailments since September 2009.Raju has been given bail on the condition that he will remain in Hyderabad till further orders and will have to give two securities of Rs 20 lakh each. He will have to depose before the investigating officer every day once he has been discharged from NIMS, Rajus lawyer Bharat Kumar said.The Central Bureau of Investigation, which has been investigating the case, has decided to approach the Supreme Court against Rajus bail order.CBI has been alleging that doctors have been prolonging the treatment of the Raju only to delay the trial in the case.Raju has been charged under various sections of the Indian Penal Code including Section 120B for criminal conspiracy, under Section 409 for breach of trust, under Section 420 for cheating, and under Section 468 and Section 471 for forgery. Raju has not attended court proceedings since trial started in September 2009 and his testimony was taken through a questionnaire served on him in hospital. He had retracted his confession, labelling all charges levelled by the CBI as false. The Satyam founder and former chairman resigned from the 47 | P a g e

The Satyam Scam company after confessing to countrys biggest financial fraud of Rs 14,000 crore and disclosing massive financial irregularities in January 2009.Raju and his brother Rama Raju were arrested by the Andhra police on January 9, 2010. Nine other accused, including top company officials and auditors, were also arrested in the case. Many of the people got agitated about the fact that this man has not appeared in court a single day, has been living in some five star hospital room. It seems so unfair that he makes this national confession of fraud then spends the better part of his time in a five star hospital room and is now out on bail. But the fact is that It is not very unusual. One must understand the process and the way it works. He has been in judicial custody for better part of last 17 months because the law provides that the police custody is only for the first 14 days. When he is on judicial custody, he is under the supervision of the court. Therefore if the court was satisfied that he was entitled to medical treatment and was entitled to be in hospital, then that is the decision that the court has made. Certainly the court is entitled to monitor that condition. If there was any evidence to show that he was well and doesnt deserve to be in hospital, then that is something that the court would take up and pass appropriate directions to shift him back into jail.So it really depended as to what was the material that the judge has seen or the magistrate had seen, to be able to satisfy himself that he deserved to be in hospital for this entire period of time. The fact that the High Court has agreed or approved his bail condition. Assuming its not on the grounds of health, the other grounds that he would be due bail are Now that the chargesheets have been filed, the crucial stage of investigation is over, the court would have felt that it is unlikely he can now tamper with witnesses, because now witnesses will come to the court room and give their depositions. At this point of time he would be entitled to bail. The law on bail is fairly well settled, it is not to be treated as a preventive detention or a punitive detention period prior to the trial.Having spent 17 months in custody, three chargesheets having been filed, the CBI has more or less completed its investigations, the court would now have felt its probably a ripe time to grant him bail.If we recollect even in the Harshad Mehta case, which was in 1991 where there was a scam of Rs three thousand crores , he was granted bail in about three months time. Raju has been suffering from Hep-C for the last 3-4 years. Its a big relief (getting bail) though he is still unwell, Rama Raju told the media. He said the team of lawyers was also working to clear the cases in other countries including the US.The special court heard arguments on framing of charges against four of the 10 accused including S Gopalakrishnan, Srinivas Talluri, B Suryanarayana Raju and Ch Srisailam.Hearing on G Ramakrishna and V S Prabhakar Guptas pleas was posted for Friday. The court also granted permission to Venkatapathi Raju to appoint his own lawyer. The counsel for Talluri 48 | P a g e

The Satyam Scam Srinivas and S Gopalakrishna argued that they were neither employees nor directors of the company but were just statutory auditors who look into accounts provided by the company.Counsel of Suryanarayana Raju contended that his client was not a director of the company and he cannot be termed a coconspirator in the case. The question was that it was quite unfortunate that the premier investigation agency was not able to prove that Ramalinga Raju was in a state of health where he could appear in court. The CBI had failed to do that and Raju was out on bail and he hasnt attended court a single day. Last week wrote submissions to court retracting his national confession of fraud and said that all of CBIs charges are false and the fact is that The stage is now come for framing of charges and that is a time when the accused is required to actually plead guilty. The court has to hear the arguments of both the prosecution and the defence on whether the charges are made out. It is after that the court will frame charges, if it is so inclined. That is a stage when the accused is required to plead.The stage for pleading guilty has not yet arisen. All this time, the last 17 months seems to be in the period of investigation and the CBI has filled three chargesheets after conducting investigations in India and overseas. One cant sort of criticize the process, one cant criticize the fact that you have not been in court to plead guilty because the stage has not come. On the other hand in relation to the issue as to whether he was unwell, because he was in judicial custody its for the court to take that into consideration.Even that CBI put in a request for a second medical opinion. Where have had newspapers of repute or magazines of repute, put out stories saying that he seems to be in reasonable health. He seems to be walking around, he can at least appear in court and yet this man has escaped appearing in court altogether but the council for the CBI mentioned that the application was filled recently and is pending consideration by the magistrate. In fact, the magistrate could have directed the setting of a medical board to determine whether there is any substance in these allegations. If that is the case and if found by the medical board he was actually well then he would have been taken back to jail. Many believe that this is a case that should have moved a lot faster on than it had been but A lot depended upon the investigations that were taking place, and charges that they wanted to frame. What the CBI was really doing was establishing a case of divergent of funds. That is an investigation that took better part of a year. Until those investigations were over and they could file those supplementary charge sheets, it was difficult for the court to actually start the process of framing of charges because that seemed to have been a very important part of the entire prosecution case. So it's only lately that three charge sheets have been filed and the court feels that it was ripe to commence the process that they had started the process then. 49 | P a g e

The Satyam Scam

CHAPTER NO. 6 THE AUDITORS OF SATYAM AND THEIR ROLE IN THE SCAM THE PwC AND ITS ROLE IN THE SATYAM SCAM
PwC (officially PricewaterhouseCoopers) is a global professional services firm headquartered in London, United Kingdom. It is the world's second-largest professional services firm (after Deloitte) and one of the 'Big Four' accountancy firms. It has offices in 757 cities across 151 countries and employs over 163,000 people.It had total revenues of $26 billion in 2009, of which $13 billion was generated by its Assurance practice, $7 billion by its Tax practice and $6 billion by its Advisory practice.The firm was formed in 1998 by a merger between Price Waterhouse and Coopers & Lybrand. The trading name was shortened to PwC in September 2010 as part of a major rebranding exercise.As of 2009 it was the eighth largest privately-owned organisation in the United States. The firm was created by the merger of two large firms, Price Waterhouse and Coopers & Lybrand in 1998.These two firms 50 | P a g e

The Satyam Scam each have histories dating back to the nineteenth century and it has one of its branches working successfully in India. With all the Satyam mess yet to be fully sorted out, concerns are directed towards

PricewaterhouseCoopers, the auditing firm hired by them. In as much the fault lies with the top brass for trying to cook books, it is another thing for the entrusted watchdogs to fail in their duty. An accounting failure can mean one of two things: either PwC was hand in hand with Satyam or whatever documents provided to them were false and forged by Satyam honchos themselves. Either way, PwC failed miserably in it's duties. But if there was some sort of forgery then more than 2-3 people would have to be involved, going against the logic suggested by Ramalinga Raju that not many on the board knew the truth.Several articles claim that DSP Merrill Lynch found out immediately(they were apparently approached for help with a merger) that there were serious accounting issues, while PwC found out nothing for years.It could well and truly be a mirror of Enron, which brought down top dog Arthur Andersen. As the linked articles suggest, US law firms will make hay flaying both Satyam and PwC. It might well be the end of PwC, who even handle the Academy Awards(sending out the ballots, counting the votes and ensuring noone knows the results until the envelope is opened on stage). At the same time, the plight of employees and shareholders is much harder to come to terms with because of a more personal note, with friends sharing their concerns for their friends.This mega fiasco has sent the markets tumbling and shows that the horizon is dark: Indian companies will be taken on with suspicion and no doubt put to more hardship to seal the deal. To think of it, even the World Bank have been made to wear a dunce's cap: they severed their relation with Satyam only recently. The apex chartered accountants body ICAI will seek an immediate explanation from Satyam Computers auditors, PriceWaterHouse Cooper (PwC), on the financial fraud unearthed by the software companys chairman B Ramalinga Raju, before taking any action.ICAI will write a letter to PwC on 8 January and will seek an immediate reply on the issue and inform them about the process of investigation, which is on, ICAI president Ved Jain told PTI.He said that strict action will be taken if the auditors, of countrys fourth largest IT firm Satyam, are found guilty.We will ensure that to any person who has not worked according to our standards and our expectations, severe punishment be given, he said.Following a letter from the Satyam chairman, who accepted that he had misrepresented facts in the companys balance sheet, role of auditors and accountants for the company has also come under scanner.In fact, the Ministry of Corporate Affairs announced that role of directors and auditors at Satyam would be scanned by ICAI and the apex body of company secretaries ICSI.However, Jain also pointed out that before the body takes any action against the members involved in the fraud, it needs 51 | P a g e

The Satyam Scam to collect facts and information. So we are looking into that and we will start our proceedings, he added.All one needs to prove is he (auditor) was a party to the fraud. He can be booked under the Companies Act and the Chartered Accountants Act... in case of negligence by the chartered accountant, we have a severe punishment, Jain said. The Crime Branch of the Andhra Pradesh Police arrested two senior auditing executives of PricewaterhouseCoopers (PwC) for their role in the multi-crore Satyam fraud. PricewaterhouseCoopers was the company of auditors for Satyam Computers Services Limited and its role was widely criticised for overlooking the manipulations mooted by B Ramalinga Raju,.Soon after their arrest, the PwC executives were sent to judicial remand till February 6.The fraud-hit Satyam has been struggling for survival since January 7 ..In the latest developments, the auditors have been slapped with charges of cheating, forgery, criminal breach of trust and criminal conspiracy as per the Indian Penal Code.Matter stands postponed on 27th. On 28th, we have to issue notice to the public prosecutor for the matter to be taken up .and they have been remanded to judicial custody till the 6th of February, said Mastan Naidu, counsel for the arrested executives of PricewaterhouseCoopers. Earlier this month PWC said its opinions on the outsourcers financial statement may be rendered inaccurate and unreliable.After the fraud became public, the Government of India nominated a new six-member board to contain the fallout of one of the countrys largest corporate scandals, dubbed Indias Enron.The new board, which has appointed auditors KPMG and Deloitte to restate the accounts, is working to secure funding to pay salaries and other bills and appoint a chief executive and chief financial officer to steer Satyam out of the mess.Amid these developments potential buyers have begun circling Satyam, eyeing a global client base, which includes General Electric and Nestle.Larsen and Toubro, Indias top engineering and construction firm had raised its stakes in Satyam to 12 percent from 4 percent to protect its interest.U.S-based midsized outsourcer iGate Corp has also confirmed that it would be interested in buying Satyam and was in touch with private equity firms to fund a possible deal. Furious Indian investors are demanding to know how PricewaterhouseCoopers (PwC), one of the world's largest accountancy firms, missed a systematic 1 billion fraud at Satyam, the IT outsourcing giant, for as long as seven years. In contrast, Merrill Lynch, the US bank, became aware of the deception in just ten days. PwC's role in "India's Enron" came under the spotlight amid allegations that large Indian companies regularly use misleading accounting techniques and bully analysts, accountants and auditors into staying quiet. B. Ramalinga Raju, shocked corporate India on when he confessed to inflating the company's profitability, which led to more than 1 billion in fictitious cash and other assets 52 | P a g e

The Satyam Scam on its books. Investors had been told that a $1 billion cash pile Satyam possessed was, in fact, just $78 million, Mr Raju disclosed in a letter to the board a straightforward falsehood that the company's auditors might have detected had they run a rudimentary check of the group's bank accounts, according to experts. "It's hard to miss $1 billion of cash," Dennis Beresford, a former chairman of the Financial Accounting Standards Board, the US accounting watchdog, said. Satyam's bogus accounts had been audited by Price Waterhouse, the Indian-based auditor, which is a member firm of PricewarterhouseCoooper International, since the financial year 2000-2001. The company's balance sheet as of March 31, 2008 was signed off by Srinivas Talluri, a partner of Price Waterhouse in Hyderabad, the southern Indian city where Satyam is based. Merrill Lynch had been retained by Satyam ten days before Mr Raju's confession, to explore merger opportunities for the outsourcing giant, which was already struggling with corporate governance issues. Just hours before Mr Raju admitted to the fraud, Merrill Lynch severed its ties with the company. "In the course of our engagement, we came to understand that there were material accounting irregularities, which prompted our aforesaid decision," a spokesman for Merrill said. PwC said today: "The audits were conducted by Price Waterhouse in accordance with applicable auditing standards and were supported by appropriate audit evidence. "Given our obligations for client confidentiality, it is not possible for us to comment upon the alleged irregularities. Price Waterhouse will fully meet its obligations to cooperate with the regulators and others." Analysts said that the Satyam scandal had underscored the need for urgent reform to India's creaking corporate governance standards. The country, for instance, does not restrict auditors from carrying out consulting work for the companies they audit. Saurabh Mukherjea, of Noble, the London-based investment bank, said: "We have run into listed companies where the advisory arms of the audit firm earn consultancy fees for help with M&A, new entity structuring and tax minimisation." In most Western countries rules limit such activities, which could trigger conflicts of interest for auditors. Mr Mukherjea suggested that the Satyam fraud should not come as a shock. "Our experiences suggest that manipulative accounting and aggressive promoter [owner] practices are more common in India than is generally believed to be the case," he said. "Many [Indian] firms have become so convinced of their own invincibility that they do not even bother denying irregularities when confronted with the evidence. They simply threaten you." Analysts say that creative accounting techniques, such as recording revenue ahead of time, booking fictitious sales, manipulating expenses and the disbursal of cash to outside companies in which a group's directors have an interest are commonplace in India. Foreign institutional investors are also weary of the influence exerted by India's politicians over the country's regulatory system. 53 | P a g e

The Satyam Scam PwC's roll in the Satyam scandal will now be probed by the Securities and Exchange Board of India, the markets watchdog, and the Indian government's anti-corruption office. The Institute of Chartered Accountants of India is also investigating and has the power to bar Price Waterhouse from working in the country indefinitely, a spokesman for the body said. Satyam was also listed on the New York Stock Exchange and faces a class action lawsuit in the US.

POLICE ARREST OF THE SATYAM AUDITORS

The two senior partners of the accounting firm's Indian subsidiary, Price Waterhouse,S. Gopalakrishnan and his deputy Srinivas Taluri, were hauled in by Andra Pradesh state police on Saturday for questioning on charges of conspiracy, failure to scrutinise records and connivance. Mr Gopalakrishnan is Price Waterhouse's chief relationship partner in India, and Mr Taluri its engagement leader. Their detention, which follows that of Satyam founder and chairman B. Ramalinga Raju, brings the number of arrests over the massive corporate scandal to six and marks the first time in Indian corporate history that an auditor has been detained for failing to ensure a client's financial integrity. 54 | P a g e

The Satyam Scam The Police said that more arrests were likely in coming days. Under Indian law, a criminal conspiracy conviction can carry a maximum life sentence and a proven charge of fraud up to seven years jail.Price Waterhouse has been under intense pressure since Mr Raju admitted in a statement to the Bombay Stock Exchange earlier this month that the company's accounts had been inflated over several years. It is under investigation by India's accounting board. Mr Taluri is believed to have signed off on Price Waterhouse's most recent Satyam audit report, but following Mr Raju's confession, Price Waterhouse admitted the audit was no longer reliable .The latest arrests follow a raid on the auditing firm's Hyderabad offices by Criminal Investigation Department officers who seized documents and electronic files related to Satyam's books. A Price Waterhouse spokesman called the arrests "unfortunate" and said it had seen no "evidence of any wrongdoing" by the men. "The firm and its related team have fully co-operated with the investigating agencies to provide all the documents called for," he said. "Under the circumstances, detention is unfortunate. We will actively work to secure the release of the two partners. "As everyone else, we were shocked by the massive fraud at Satyam and by the elaborate efforts undertaken to conceal the fraud from the board of directors, the shareholders and auditors." Institute of Chartered Accountants of India president Ved Jain said the arrests raised "serious doubts" about the role of the auditors in the Satyam scandal. "Unless the police believe that, prima facie, there is evidence that the auditors themselves played a part in perpetrating the fraud, they could not have arrested them," Mr Jain said. A CID spokesman told The Hindu newspaper that the two men were being charged with forging fixed deposit receipts. Satyam's accounts allegedly showed that French bank BNP Paribas held large volumes of fixed deposit receipts in the company, but prosecutors said last week that the bank denied holding such receipts. The scandal, which has been likened in scale to the massive Enron fraud, has rocked India's corporate community and shaken global confidence in the country's IT industry. But it has not deterred potential suitors. India's biggest engineering company, Larsen & Toubro, edged closer to a takeover bid of Satyam , almost tripling its stake in the country's fourth-largest software provider to 12 per cent.The share grab means L&T is now Satyam's single largest shareholder and is entitled to a seat on Satyam's board. An L&T spokesman said the increased stake was a defensive move aimed at protecting its own interests and that the company had not made a decision to further raise its stake. Indian media reports suggest that L&T has been lobbying government ministers for permission to buy Satyam. This would vault the engineering firm into India's IT big league. But any potential bidders would want a clearer 55 | P a g e

The Satyam Scam picture of Satyam's financial situation. In court last week, prosecutors alleged that Mr Raju used fictitious names to divert 200 million rupees ($6.24 million) a month from the company's accounts "for his personal wealth" through 13,000 "ghost employees" and that police had uncovered evidence of secret business dealings between Mr Raju and a real estate broker. Through his lawyers Mr Raju, who remains in custody on charges of cheating, forgery and breach of trust, continues to insist he made no personal gain from the fraud. Satyam's stock has fallen nearly 78 per cent since the scandal broke. The Central Bureau of Investigation (CBI) arrested the internal auditor of former Satyam Computer Services Limited V S Prabhakar Rao. Rao was under investigation for his role in assisting the Raju brothers in cooking up the balance sheets and forging bank statements. A CBI official said that though Raos role was suspected since the beginning, they could not establish a link till now. We have arrested him today. We have adequate proof to link him with the entire scam, the official said. Rao was also a key aide of Satyam founder B Ramalinga Raju and is learnt to be the brain behind suggesting how to fudge the account statements. Rao was produced before the Nampally court which remanded him to four days in CBI custody.

CHAPTER NO. 7 SATYAM SCAM : WORLD BANK

Software Giant Satyam Computer Services has reportedly been banned from doing any off-shore work with the World Bank. According to a Fox News report, forensic experts and bank investigators discovered that the sensitive data from their computers were logged to unknown destination over internet. As per reports, key logger software was found on workstations inside the banks Washington headquarters, allegedly by one or more contractors from Satyam Computer Services. Satyam spoke up 56 | P a g e

The Satyam Scam Satyam denies report on offshore ban with World Bank. Satyam further added that reports are riddled with error and are out of context. Investigators say that the software, which operates through a method known as keystroke logging, enabled every character typed on a keyboard to be transmitted to a stillunknown location via the Internet. Upon its discovery, bank officials shut off the data link between Washington and Chennai, where Satyam has long operated the banks sole offshore computer center responsible for all of the banks financial and human resources information. I want them off the premises now, World Bank President Robert Zoellick reportedly told his deputies.Satyam is publicly listed on the New York Stock Exchange and boasts having two billion dollars in sales and more than 150 Fortune 500 companies as clients .In 2003, Satyam won a lucrative five-year sole source contract to design, write and maintain all of the World Banks information systems. The contract, which began at $10 million, had grown to over $100 million by 2007. This year, the contract was not renewed. Satyam has declined to comment.It is still not known how much information was stolen. But sources inside the bank confirm that servers in the institutions highly restricted treasury unit were deeply penetrated with spy software last April. Invaders also had full access to the rest of the banks network for nearly a month in June and July.One World Bank director told FOX News that as many as 40 servers have been penetrated, including one that held contract-procurement data. It took ten days for bank officials to detect that theyd been invaded. Once they did, they shut down all external servers, except for e-mail, which it turns out the invaders were already using as their entrance point. The World Bank banned Satyam from providing software services to the financial institution for eight years due Satyam The report quotes a World Bank official as saying "improper benefits to bank staff" and "lack of documentation on invoices" were the reasons behind the ban applicable till 2016. The alleged ban also follows Satyam's controversial attempt to pay US 1.6 billion dollars for two distressed real estate and infrastructure companies that were controlled by the outsourcer's founder and chairman. The attempted purchase sparked an angry investor revolt that saw Satyam's stock drop 55 per cent in value. Satyam started providing IT services to the World Bank in 2003. Two years later, allegations of bribery surfaced. In 2007, an internal World Bank investigation found that former VP Mohamed Muhsin had secured contracts and purchase orders worth $100 million for the Indian firm in return for Satyam's stock options (ADRs) at preferential prices, as per earlier reports by Fox News. However, Satyam was allowed to work for the bank till 2008. here have also been allegations against Satyam of causing security breaches at the bank. World Bank's records, which contain sensitive financial information, have reportedly been illegally accessed over the last year. Previous Fox News reports have 57 | P a g e

The Satyam Scam accused Satyam of installing spyware on World Bank workstations that would have allowed access to sensitive financial information at the bank. "The bank should have been more responsible about reporting publicly on what they knew to be misconduct at highest levels of Satyam," the paper quoted Bea Edwards, International Reform Director at the Government Accountability Project, Washington DC, watchdog group, as saying. In February 2008, the World Bank temporarily suspended Satyam from bidding on new contracts, and then in September formally made the firm ineligible to bid on future contracts, the Journal added. But the paper said it did not announce the ban, called a debarment, until December 23 -- and then only after press reports about it. Meanwhile, a World Bank spokesperson told the Journal that it had acted responsibly. "We took the action we needed to take as an institution to maintain our high corporate integrity standards," the spokesperson said. The revelation of Satyam Computer Services Ltd about the fraud may dent the image of the World Bank as it kept quiet for a month about its suspicion of the IT firm's corporate malpractices, a leading financial daily said. Indian IT services provider Satyam Computer Services had demanded a public apology from the World Bank over claims of "providing improper benefits to bank staff and for failing to maintain documentation to support fees charged for its subcontractors".employees installed a spyware and thefting sensitive financial information That is an old news (just that the World Bank banned it now) and that is not why the CEO resigned. The CEO resigned for the investor issue.

CHAPTER NO. 8 CASE STUDY ANALYSIS: SATYAM SCAM

Satyam Computer Services Limited is a leading global consulting and IT services company spanning 55 countries. It was established by Mr. B. Ramalinga Raju and B. Rama Raju on 24 June 1987. Satyam Computer Services Ltd is one of the leading global consulting and IT services company that offers end-to-end IT solutions for a range of key verticals and horizontals. Satyam Computers has domain expertise in verticals such as Automotive , Banking and Financial Service, Insurance and Healthcare, Manufacturing, Telecom, Infrastructure, Media, Entertainment, and Semi-conductors. 58 | P a g e

The Satyam Scam Satyam today has nearly 40,000 employees on its rolls, working in development centers in India, the USA, the UK, the UAE, Canada, Hungary, Singapore, Malaysia, China, Japan and Australia. Satyam Computers' network is spread over 55 countries across 6 continents. Satyam serves over five hundred and fifty eight corporations world over including over one sixty three Fortune five hundred corporations. Satyam Computers was founded in June 1977 as a private limited company by Ramalinga Raju along with one of his brothers-in-law, DVS Raju. In June 1991, Satyam Computers got its first Fortune 500 Client. In the same year in August, Satyam Computers was recognized as a Public Limited Company. Satyam went public in May 1992 and its issue was oversubscribed 17 times. In July 1993, Satyam entered into a joint venture with Dun & Bradstreet. - On January 26th a joint venture company called Dun & Bradstreet Satyam Software (P) Ltd. was incorporated. In 1995 During the year company issued 37,17,000 12% unsecured fully convertible debentures part A of Rs.100 each on right basis for the shareholders in proportion of 1 FCD for every 5 share held. Founder and Chairman of Satyam Computer Services Ltd; Chosen as Ernst & Young Entrepreneur of the Year For Services in 1999. Byrraju Ramalinga Raju is one of the pioneers of the Information Technology industry in India.Ramalinga Raju was born on September 16, 1954 in a family of farmers. He did his B.Com from Andhra Loyola College at Vijayawada and subsequently did his MBA from Ohio University, USA. Ramalinga Raju had a stint at Harvard too. He attended the Owner / President-course,Harvard. After returning to India in 1977, Ramalinga Raju moved away from the traditional agriculture business and set up a spinning and weaving mill named Sri Satyam. . Thereafter he shifted to the real estate business and started a construction company called Satyam Constructions. In 1987, Ramalinga Raju founded Satyam Computer services Company Private LTD. along with his brother-in-law DVS Raju.He has won several awards and honors, Dataquest IT Man of the Year in 2000, CNBC's Asian Business Leader - Corporate Citizen of the Year award in 2002 and E&Y Entrepreneur of the Year Award in 2007.

THE SCAM:No matter how much we snub, the bad luck has followed us right into the New Year. The show stopper this time around is our one time super star - Satyam. The company, once cajoled by investing community, revered by new IT aspirants and one of the more trusted IT partner, is no more than a fallen angel today. Satyam, the fourth largest Indian IT company, with an employee strength of around 53,000 people, could have had a better story to tell, had not the promoters indulged into accounting 59 | P a g e

The Satyam Scam malpractices and financial manipulations. This fact came to light, when the Satyam chairman and promoter, Mr. Ramalinga Raju, in his resignation letter to the capital market fraternity, brought to fore the mammoth scale at which the company has been manipulating its financial numbers over past eight years. It attributed all its recent actions as attempts to salvage the company from imminent fate. In his letter to the entire financial market community, the chairman states that the companys profits had been manipulated over the last several years, with the balance sheet as on September 30, 2008 carrying inflated (non-existent) cash and bank balance of Rs 5,040 crore (as against Rs 5,361 crore reflected in the books), an accrued interest of Rs 376 crore which is non-existent, an understated liability of Rs 1,230 crore on account of funds arranged by the promoters and an over stated debtor position of Rs 490 crore (as against Rs 2651 reflected in the books). By the end of that day, the fourth largest IT company lost a staggering Rs 10,000 crore (Rs 100 billion) in market capitalisation as investors reacted sharply and dumped shares, pushing down the scrip by 78 per cent to Rs 39.95 at BSE. Though Mr. Raju has clearly stated that none of the high level management has the idea of the brewing trouble; the board and the management cannot plead innocence on the basis of ignorance, when their prime duty is safeguarding the interest of Satyam and all the stakeholders of the company. The only problem would be that since the company is in a problem now, all their accounts would be siezed and even if the business operations are operated the payments would be struck. This is the reason the employees are in panic stage and have already started looking out for new job options in case the company is closed for a while. Along with the already employed staff there are around 10000 freshers every year who are in waitlist waiting for their call from Satyam who are also going to not get a call back and they now have to apply for other MNCs. The fact is that its not alone Raju in this whole drama who has claimed that he is alone responsible but how do you think a single person can do such a big fraud? What about the people are always with him in his business operations? What about the government who gave the company public lands at dirt cheap amounts. Not only the satyam clients but their employees were also having a huge confidence in the company and were sure that the company will continue in the long run along with better growth but the question stands the same .But One of the biggest Chartered Accountancy PricewaterhouseCoopers which is highly reputed in India because there are thousands of students trying to get into PWC for completing their CA Course, is also in question because this firm was handling all the Satyams operations and if such a big scam was running around how did PWC not find out? Or were these people also bribed by Mr Raju in tunes of crores of rupees.

60 | P a g e

The Satyam Scam This by no means seems to be the end to the Satyam saga, which has been unfolding since the last year. In the month of December 2008, the company, in an incomprehensible move, announced the acquisition of two of its promoter group companies namely Maytas Properties (unlisted) and Maytas Infrastructure(listed); which the chairman in his letter acknowledges as a last attempt to fill the fictitious assets with real ones. The deal was called off within a space of 24 hours on strong opposition from the other stakeholders. This was followed by a suit filed against Satyam by a client Upaid, a UK-based online and mobile payments enabler; which further maligning the companys corporate image. As if this wasnt enough, World Bank, one of the biggest clients of the company - imposed an 8-year ban on the IT Company from doing any offshore work with it on the reports of data theft. These string of mishappenings, raised serious Corporate Governance Issues for Satyam, and also raised concerns on the global level about the corporate governance ethos of India Inc. And now with the chairman having made a clean breast of fraud, things are only looking grimmer for the company. At this point in time, the company seems to be lucrative acquisition target, with poor shareholding pattern, disappearing market faith and hopeless financial state. AFTERMATH:Raju had appointed a task force to address the Maytas situation in the last few days before revealing the news of the accounting fraud. After the scandal broke, the then-board members elected Ram Mynampati to be Satyam's interim CEO. Mynampati's statement on Satyam's website said:"We are obviously shocked by the contents of the letter. The senior leaders of Satyam stand united in their commitment to customers, associates, suppliers and all shareholders. We have gathered together at Hyderabad to strategize the way forward in light of this startling revelation. The Satyam effect has starting spreading its tentacles, and has proved to have a negative impact on the Engineering students. IT (Information Technology) which used to be the Mecca of all jobs is now the outcaste.Students are prefering to take jobs in their core branches rather than move to the dwindling IT sector . Huge losses to investors aside, the Satyam scandal has caused serious damage to India Incs reputation as well as the countrys regulatory authorities outside, the government has said. Seeking to dismantle the existing board and to nominate ten new directors at the beleaguered IT firm, the Centre has said in its petition before the Company Law Board that the interests of the company will not be safe in the hands of the present board of directors. The impact of the Satyam scam is short-term and will pass quickly, unless there is another scandal involving another IT services firm. The negative publicity is largely media hype, amidst a 61 | P a g e

The Satyam Scam political backlash against off shoring of US jobs in the current economic slump, and international corporations will continue to make the right decisions for their business models to remain competitive. As all the leading IT services vendors have significant Indian staff-bases, there will be minimal impact on the Indian IT sector as a result of this deal. Clients which sign with the Western headquartered firms (Accenture, IBM, HP etc) would have done so whether or not the Satyam scandal had happened. The question of Who will benefit from the entire episode, other Indian IT firms or international counterparts like IBMs and Accentures or newer geographies and emerging IT service players like Eastern European companies, China, Philippines etc. in which the concern is more regarding the governance of firms from countries such as China and Russia, which have much less stringent regulatory procedures than India and the US/Europe. The IT services spend over the next 12 months will remain flat. Spending on commodity offshore IT services will increase in the region of 5%, as international corps look at lowhanging fruit cost reduction opportunities namely application maintenance / development services however, spending on discretionary project will decrease as many initiatives are put on hold. The Indian HQ-ed suppliers have a responsibility to treat Satyams situation with sensitivity, as the reputation of the firms is currently being questioned. The central government on Friday sacked Satyam Computers directors and announced it will appoint 10 new directors within seven days to run the company tottering on the brink of collapse after its founder B. Ramalinga Raju rocked corporate India by confessing to the countrys biggest financial fraud of Rs.70 billion (RS.7,000 crore).With this move Saturdays meeting of the truncated board of the company was cancelled. The board has shrunk from nine to five members after four independent members quit in the wake of Rajus aborted bid Dec 16 to buy two cash-strapped firms, Maytas Properties and Maytas Infra, promoted by his two sons.The government wants to protect the interests of the employees (53,000) and other stakeholders, Company Affairs Minister Prem Chandra Gupta told reporters in New Delhi. He said the Company Law Board has agreed to the governments proposal to restrain Satyam board members to continue as members and appoint 10 new members.The government move was cheered by Satyam employees whose job was at stake as the company had funds to pay only the December 2008 and January 2009 salary which, according to the firm, comes to Rs.5 billion (Rs.500 crore) a month.The ministers announcement came within hours after market regulator Securities and Exchange Board of India summoned Raju to appear before it Saturday to depose on the massive fraud by him. The announcement coincided with the crime branch of the Andhra Pradesh police beginning its own probe into the scam. THE AUDITORS AND THEIR ROLE:62 | P a g e

The Satyam Scam PwC (officially PricewaterhouseCoopers) is a global professional services firm headquartered in London, United Kingdom. It is the world's second-largest professional services firm (after Deloitte) and one of the 'Big Four' accountancy firms. It has offices in 757 cities across 151 countries and employs over 163,000 people. With all the Satyam mess yet to be fully sorted out, concerns are directed towards PricewaterhouseCoopers, the auditing firm hired by them. In as much the fault lies with the top brass for trying to cook books, it is another thing for the entrusted watchdogs to fail in their duty.An accounting failure can mean one of two things: either PwC was hand in hand with Satyam or whatever documents provided to them were false and forged by Satyam honchos themselves. Either way, PwC failed miserably in it's duties. But if there was some sort of forgery then more than 2-3 people would have to be involved, going against the logic suggested by Ramalinga Raju that not many on the board knew the truth.Several articles claim that DSP Merrill Lynch found out immediately(they were apparently approached for help with a merger) that there were serious accounting issues, while PwC found out nothing for years. The Crime Branch of the Andhra Pradesh Police arrested two senior auditing executives of PricewaterhouseCoopers (PwC) for their role in the multi-crore Satyam fraud. PricewaterhouseCoopers was the company of auditors for Satyam Computers Services Limited and its role was widely criticised for overlooking the manipulations mooted by B Ramalinga Raju,.Soon after their arrest, the PwC executives were sent to judicial remand till February 6.The fraud-hit Satyam has been struggling for survival since January 7 .In the latest developments, the auditors have been slapped with charges of cheating, forgery, criminal breach of trust and criminal conspiracy as per the Indian Penal Code.Matter stands postponed on 27th. On 28th, we have to issue notice to the public prosecutor for the matter to be taken up .and they have been remanded to judicial custody till the 6th of February, said Mastan Naidu, counsel for the arrested executives of PricewaterhouseCoopers.

MAHINDRA SATYAM AND ITS NEW MANAGEMENT :Tech Mahindra Ltd. Placed the highest bid to acquire Satyam Computer Services Ltd. Tech Mahindra bid Rs 58 per share, above what Larsen & Toubro and billionaire tycoon Wilbur Ross offered. Tech Mahindra will own 31% of the IT mammoth at a cost of Rs1,757 crore, or slightly more than US $350 million. It looks like Mahindra got a bargain considering the firm is worth a reported $2.1 billion. Who knows what the real value is, but its surely more than Rs 1,757 crore for almost a third of the firm, commented Francesco Gopalakrishnan, EconomyWatch correspondent. The Satyam board 63 | P a g e

The Satyam Scam selected Tech Mahindra through a global competitive bidding process launched by the company on 9th march, 2009. After evaluating the financial and technical bid of each bidder, the board and Justice Bharucha ranked the bidders based on the price. The result illustrated Tech Mahindra to be the highest bidder. On 5 February 2009, the six-member board appointed by the Government of India named A. S. Murthy as the new CEO of the firm with immediate effect. Murthy, an electrical engineer, has been with Satyam since January 1994 and was heading the Global Delivery Section before being appointed as CEO of the company. Murty has seen Satyam grow from less than 100 associates to more than 50,000 associates. Currently, he is responsible for Delivery Excellence (in his capacity as Chief Delivery Officer) and also Leadership Development. As part of Leadership Development, ASM integrates Satyam's Real Time Leadership Center and Satyam Learning World. He is also responsible for the optimal utilization of Human Resources. Prior to this, he played several key roles (like Head - Human Resources, Head Insurance vertical etc). AS Murthy reviews all Asset Businesses (Support processes and Service Offerings) at Satyam. His mission is to enable ordinary people perform extraordinary tasks through right orientation, process-centric approaches and continual learning. However, a year later, the company survives albeit as Mahindra Satyam under its saviour, the tractors-to-software Mahindra group. Though the challenges of nursing a stricken company to health are by no means over, the company, under the new management, seems to have more than weathered the storm and its future as a going concern appears assured. The company has been able to even increase its client base and chart a fresh course, despite the rough weather it faced over the months. The newly constituted board hired KPMG and Deloitte to start the long task of restating the accounts, which was completed in the first half of 2010.

CHAPTER NO. 9 CONCLUSION

Satyam Computer Services Ltd is in a total mess with the Former Satyam Chairman B Ramalinga Raju surrendering before the andhra pradesh police under sections 120B, 409, 420, 468, 471. Along with him his brother and the companies CFO was also arrested . The Securities and Exchange 64 | P a g e

The Satyam Scam Board of India [SEBI] had ordered for an enquiry to look into this matter in detail. Along with this news the most important point would be the stock prices dipping more and reached 6Rs/share which is seriously very low considering it was trading it 400-500Rs levels a year back. Though Mr. Raju has clearly stated that none of the high level management has the idea of the brewing trouble; the board and the management cannot plead innocence on the basis of ignorance, when their prime duty is safeguarding the interest of Satyam and all the stakeholders of the company. The impact of the Satyam scam is short-term and will pass quickly, unless there is another scandal involving another IT services firm. The negative publicity is largely media hype, amidst a political backlash against off shoring of US jobs in the current economic slump, and international corporations will continue to make the right decisions for their business models to remain competitive. As all the leading IT services vendors have significant Indian staff-bases, there will be minimal impact on the Indian IT sector as a result of this .The central government sacked Satyam Computers directors and announced it will appoint 10 new directors within seven days to run the company tottering on the brink of collapse after its founder B. Ramalinga Raju rocked corporate India by confessing to the countrys biggest financial fraud of Rs.70 billion (RS.7,000 crore). Tech Mahindra Ltd. Placed the highest bid to acquire Satyam Computer Services Ltd. On 13 April 2009. This is just over four months after the massive accounting scandal was made public when the founder, Ramalinga Raju, confessed to inflating the books to over $1 billion above their worth. The takeover bid is only a month after Satyam announced it was up for sale. Tech Mahindra bid Rs 58 per share, above what Larsen & Toubro and billionaire tycoon Wilbur Ross offered. Tech Mahindra will own 31% of the IT mammoth at a cost of Rs1,757 crore, or slightly more than US $350 million. However, a year later, the company survives albeit as Mahindra Satyam under its saviour, the tractors-to-software Mahindra group.The company, under the new management, seems to have more than weathered the storm and its future as a going concern appears assured. The company has been able to even increase its client base and chart a fresh course, despite the rough weather it faced over the months.

BIBLIOGRAPHY
BOOKS REFFERED: Mrs. Ria Rupani (2010), Business Ethics And Corporate

Governance ,Himalaya Publications.

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The Satyam Scam

Mrs.

Anita

Bobade

(2010),Business

Ethics

&

Corporate

Social

Responsibility, Vipul Prakashan.

NEWSPAPERS: THE TIMES OF INDIA ECONOMIC TIMES HINDUSTAN TIMES

WEBLIOGRAPHY
http://www.google.co.in/search?aq=0&oq=RAMALINGA&sourceid=chrome&ie=UTF8&q=ramalinga+raju http://www.google.co.in/search?sourceid=chrome&ie=UTF8&q=RAJU'S+COURT+PROCEEDINGS 66 | P a g e

The Satyam Scam http://en.wikipedia.org/wiki/Satyam_scandal http://www.google.co.in/search? hl=en&q=SATYAM+SCAM+WORLD+BANK&btnG=Search&aq=f&aqi=&aql=&oq=&gs_rf ai= http://en.wikipedia.org/wiki/Mahindra_Satyam http://satyamscam.in/ http://www.google.co.in/search?aq=f&sourceid=chrome&ie=UTF-8&q=MAYTAS http://www.google.co.in/search? hl=en&q=satyam+share+price&aq=5&aqi=g10&aql=&oq=SATYAM&gs_rfai= http://www.google.co.in/search? hl=en&q=GOVTS+STEPS+TO+SAVE+SATYAM&aq=f&aqi=&aql=&oq=&gs_rfai= http://www.google.co.in/search? hl=en&q=satyam'S+NEW+management&aq=f&aqi=&aql=&oq=&gs_rfai=

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