Who’s The Culprit ?

Posted in Business by tux4life on January 15, 2009

By this time, most of us would know about the scam involving Satyam Computers.

Former CEO and founder of Satyam, Mr. Ramalinga Raju confessed on January 7th that he had fudged the accounts of the company and inflated earnings / profits / cash on hand etc.

There are a lot of facts that does not go along with Mr. Raju’s confession.

In his confession he says “He pulled of the entire scam himself and the rest of management including the board of directors were not aware if”.

This is a dumb statement and even a common man can easily figure out that such a thing would not be possible at all.

To briefly quote what might have happened, Mr. Raju started making good profits out of Satyam.  Being a entrepreneur, he had other business interests and needed capital to support them (Maytas Infra and Maytas Properties).  More over, the greed for money had set in Mr. Raju and this might have made him lift money out of the company and invest on benami accounts as cash and as fixed assets (such as land).  Per sources from IBN, Mr. Raju’s family owns 6500 acres of land (mysteriously bought through Maytas Infra) in Andhra Pradesh.

He was true when he said, “I was riding on the back of a tiger” but the only difference is he was the one who started the ride thinking that he can fool the entire nation.

But as it turned out, his attempts to cover up the money that he possibly squandered out of the company failed.  The most notable one being the attempt to acquire Satyam’s sister concern Maytas owned by his very own decedents.  This way he tried to make the fictitious money into fixed assets.  Looks like this is straight out of a hollywood blockbuster !!

Why would an IT company want to acquire a construction company ? Precisely ! This was the question asked by many of Satyam’s investors and the deal failed and so did Mr. Raju’s attempt to cover up the fraud.

As a result of the failure to acquire Maytas (can be interpreted as failure to cover up the scam), four independent board of directors quit the company in a span of 3 days (between Dec 26th and 29th 2008).

Enough evidence to prove that the scam involved more than just Mr. Raju.  If you do not think so, here is more.

Mr. Raju had nearly 23% stake in the company but he had sold most of the shares and had only about 8% by September 2008.  Other top officials in Satyam also sold most of their shares.  Most notable ones being Mr. Ram Mynampati (interim CEO) sold 7 lakh shares and 2.5 lakh American Depository Recepits, Mr. Srinivas Vadalamani (former CFO) about 1 lakh shares. (Source IBN).

Why would all the top brass management people sell stake in the company within a short span of time?  Again enough proof that the entire top management was involved in the scam.

Not convinced still or you think thats the end of it ? Hold on.. There is more to it..

How did Satyam’s balance sheet escape the audit.  Well.. Mr. Raju might have made sure that both the internal auditors and the external auditors (PriceWaterHouseCoopers) were “taken care of” to give a clean sheet for the company.  The involvement of Satyam’s auditors and the external auditors (who never verified if the money reflected in the balance sheets was actually real) in the scam is blatantly apparent here.

Mr. Raju might have also needed help from banks to show the FD’s that never existed as real ones. Details of this have not come out. Perhaps the govt would make sure that it does not come out so that its (Bank and Govt) skin is saved.

So, without doubt, as rightly termed by the media, this is India’s Biggest Corporate Scam involving not only Mr. Raju but also the top management, internal and external auditors and possibly some banks. 😐

Lets all hope that Satyam is a lesson for all the Indian Corporates and that such a thing does not happen in the future.

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6 Responses

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  1. Balaji said, on January 16, 2009 at 2:39 am

    Haha, good one da.. suspecting a chain of accomplices including auditors, banks and the whole top management.. sounds likely.. darn, i think when the top brass sell their shares on a major scale, we shud be aware that somethings coming up 😐

  2. tux4life said, on January 16, 2009 at 3:58 am

    yeah.. when there is heavy offloading of shares, its a sign thats something is wrong..

    perhaps when this bulk trading was going on, SEBI should have stepped in and questioned the concerned people.. guess what that never happened..

    but i am pleased that govt stepped in and appointed reputed ppl as the new board..

    i can certainly see efforts from AP govt to save Mr. Raju.. but i hope that truth comes out and satyam is salvaged 😐

  3. Srini said, on January 16, 2009 at 10:48 am

    Good coverage da… just to add to this list…. i have a basic doubt. For all these fictitious income, they would have paid taxes. I believe this should run to several hundreds of crores of rupees. Why would anyone pay tax for the non-existent money.? where has all those money gone?

  4. tux4life said, on January 21, 2009 at 3:01 pm

    @srini.. im not so sure if these all the missing income is fictitious.. i jus think that money was squandered..

  5. Srirama said, on January 31, 2009 at 11:15 am

    It is not so simple.
    Raju is linked with CM of Andhra pradesh in real estate deals.
    This link and how this brought down Satyam will never come out.
    It would be interesting to know what this link is??????

  6. Srirama said, on January 31, 2009 at 11:16 am

    Never believe auditors.
    I personally paid Deloitte 10 times normal audit fee to get a BS signed even though there were FEMA viloations

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