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Founder and chairman Ramalinga Raju the head of Indian outsourcing firm Satyam
Computer Services Ltd. India’s fourth- largest software services provider resigned,
disclosing that profits had been falsely inflated for years and sending its shares
tumbling nearly 80 percent. Satyam's CEO, Ramalingam Raju, took responsibility for
broad accounting improprieties that overstated the company's revenues and profits
and reported a cash holding of approximately $1.04 billion that simply did not exist.
Satyam serves as the back office for some of the largest banks, manufacturers,
health care and media companies in the world, handling everything from computer
systems to customer service. Clients have included General Electric, General Motors,
Nestlé and the United States government. We will see lot of Satyam’s clients
migrating to competition like Infosys, TCS and Wipro etc. Mr Deepak Parekh, Mr Kiran
Karnik, and Mr C. Achutan have been mandated by the Government to shoulder the
uphill task of crisis management at the beleaguered Satyam Computer Services. The
urgency on part of the Government to appoint members for the re-constituted board
by corporate governance requirement the vacuum created by disbanding the
previous board, pursuant to a Company Law Board (CLB) order on Friday, could have
led to delisting of the company from the stock exchanges. The Ministry indicated that
it would like to keep an arm’s-length approach with the company, leaving it to the
board to take the final call on important issues.
2009: Satyam fraud spurs govt to tighten corporate norms
The mammoth fraud at IT major Satyam, involving over Rs 14,000 crore as per CBI,
proved to be the most brazen swindling act, forcing the government to re-write
corporate governance rules during 2009 and tighten the norms for chartered
accountants. While the investigating agencies had a tough time going through
voluminous documents to get to the extent of the scam and uncover the modus-
operandi of the fraud, disclosed by the company’s founder and then chief B.
Ramalinga Raju himself in January, it could still take quite some time for the courts to
punish the guilty. The government was forced to take over management of a global
player to safeguard the credibility of India Inc, besides protecting the interest of
investors and salvaging the nation’s image across the globe. Satyam fraud also hit
two other companies Maytas Infra and Maytas Properties promoted and owned by
kins of Raju. The government acted swiftly and moved the Company Law Board (CLB)
to take charge of those companies as well, besides appointing its own nominees on
the board of Satyam to salvage the company. The disclosure of accounting fraud by
Satyam founder Raju towards the beginning 2009, then estimated at around Rs 7,800
crore, not only unnerved India Inc but also the market regulator Securities and
Exchange Board of India (SEBI). Following open admission of guilt by Raju, the
Corporate Affairs Ministry worked on three fronts to save the IT company, bring the
guilty to books and streamlining regulations to prevent recurrence of such frauds in
future. The firefighting started with government moving the Company Law Board
(CLB) to supersede the board of Satyam and initiate probe into the scandal by
different investigating agencies, including the country’s premier investigating agency
Central Bureau of Investigation (CBI), and Serious Fraud Investigating Office (SFIO). In
its latest charge-sheet filed last month, the CBI pegged the size of the Satyam fraud
at Rs 14,000 crore. Simultaneously, the scam was also probed by the SEBI and
Institute of Chartered Accountants of India (ICAI).
Investigating the Satyam scam
The arrest and judicial remand of Ramalinga Raju, his brother and the Chief Financial
Officer of the Satyam Computer Services Limited might be the start of an effective
legal process to bring to justice the self-confessed perpetrator of the biggest
corporate fraud in Indian history. The Union Ministry of Corporate affairs as well as
the capital market regulator, the Securities and Exchange Board of India (SEBI), have
acted with due speed, Coordination between these agencies and the investigating
State police will be critical in this case. Going by Mr. Raju’s own confession, he and
the other perpetrators can be prosecuted under the Companies Act, the Securities
Contracts (Regulation) Act, the SEBI Act, and the Indian Penal Code. However, it must
be remembered that cases such as the Satyam scam have dragged on for years in
the courts. Neither specific legal provisions nor the specialized prosecuting agencies
have really helped in speeding up the process.
Mahindra Satyam
Software services provider Satyam Computer Services Ltd unveiled its new brand
identity, ‘Mahindra Satyam’, symbolizing the amalgamation of the Mahindra Group's
values with Satyam's expertise. "This rebranding exercise symbolizes an
amalgamation of the Mahindra Groups values with Satyam’s fabled expertise, even
as it retains that part of Satyam’s identity which signifies commitment, purpose and
proficiency of the organization and its people," Mahindra Group Vice-Chairman and
Managing Director Anand Mahindra said. With this synergistic approach, Mahindra
Satyam will learn from the best management practices of the Mahindra Group while
focusing on nurturing Satyam’s innate skills and capabilities satyam Board Executive
Vice-Chairman Vineet Nayyar said.