Ramalinga Raju’s Satyam scam has had many business analysts and experts stunned as it involved hiding of funds in excess of Rs. 7000 crores from the entire Board and also from the auditing bodies. The Serious Fraud Investigating Team will now join CID to help unravel the Satyam Fraud.
The Serious Fraud Investigating Office (SFIO) has also started probing into the role of independent directors, managers and officers of the company in the Satyam scam.
The Ministry of Corporate Affairs has given instructions to the SFIO to probe the involvement and role of the independent directors, managers and officers of the company in the alleged misrepresentation, falsification and manipulation of information in the financial statements.
“The order said it is has be probed whether the conduct of the affairs of the company by such directors and officers of the company was in an improper or fraudulent manner,” an official said.
The ministry of corporate affairs ordered the probe by Serious Fraud Investigating Office on January 13 into the scam.
The six-member team headed by K V S Singh, additional director of SFIO and five assistant directors has already begun their probe.
Satyam’s tainted founder Ramalinga Raju on Friday asked the court for special treatment for him and his brother in jail, but the prosecution said those who made money at the cost of the poor don’t deserve such privileges.
The Rajus’ petition seeking special status in the Chanchalguda central prison, where they have been lodged till January 23, was filed before the sixth additional chief metropolitan magistrate’s court.
The status was sought under rule 730 of AP Prisons Rules. Raju’s lawyer Ravinder Reddy said they wanted a special cell for the Raju brothers as per the rules. The Raju brothers reportedly spent their time in jail since January 10 with dowry offenders.
After hearing the arguments of the public prosecutor as well as the defence lawyers, the magistrate posted the matter for further hearing
on January 19.
Ramalinga Raju the main accused over the multi crore Satyam scam is trying to avoid SEBI’s probe in the case. “We issued an order at 8.30 pm and he surrendered at 9 pm. So obviously he knew it would be difficult if he came in front of us and if he was questioned by SEBI,” said Pradyumna K Reddy, advocate for SEBI.
So if SEBI lawyers are to be believed, was there a planned strategy to escape interrogation? Sources say that Raju used his political connections to ensure that he is arrested before SEBI could interrogate him. And then despite having a provision of seeking bail once in judicial custody, his lawyers did not apply for bail.
The Satyam scam has started showing its deathly effects, almost literally. Apparently fearing that he may lose his job, a 23-year-old employee of scam-ravaged Satyam Computer allegedly committed suicide in Chennai, police said.
Vishwa Venkatesan, hailing from Salem, on Wednesday consumed poison. He was referred to the General Hospital where he died, they said.
The Board is still to finalise who would handle the mantle of the CEO of Satyam. Rumors are rife that Vivek Paul is all set to don the post of the CEO for Satyam and help the company get out of the mess, it’s founder Ramalinga Raju put it through.
Vivek Paul has an impressive profile and surely seems the right man for the job. P.
Vivek Paul began his career working Bain & Company and PepsiCo. In 1990 Paul joined General Electric where he spent 10 years. During his tenure, he ran GE’s Global Computerized Tomography business, reporting directly to the current Chairman of GE. Paul also served as the CEO of GE’s medical equipment joint venture in India, known as IGE, recognized by the Economist as the best joint venture in Asia.
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.
“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.
With a high profile board at the helm of Satyam, the stakeholders in Satyaam are seeing some ray of hope that all is not lost as yet.
The new board of fraud-hit Satyam Computer Services will meet again on Saturday to look for ways to raise new funds after both the government and the company rejected talk of a state rescue bid.
Media speculation of government aid has mounted as analysts questioned whether India’s biggest corporate fraud had left the outsourcing firm with enough money to pay its 50,000 staff.
But Economic Affairs Secretary Ashok Chawla told reporters on Thursday that the government was not looking at any direct support for the company or bailout “at this stage.”
Deepak Parekh, a senior banker and Satyam board member, said it had 17 billion rupees ($348 million) in receivables and may not need new funding if the money came in on time. But Parekh added the board would consider bank loans if necessary.
The government, which dissolved Satyam’s previous board last week, appointed three new directors on Sunday and another three late on Thursday to help steer the company out of crisis.
Company Affairs Minister Prem Chand Gupta said the first impression from the new directors about the company is that its operations are sound and that “by and large” major customers were willing to remain with the firm.
“All these are steps in the right direction but they need to get a CEO and CFO in place first to run the company’s daily operations. That should be a priority,” said Gajendra Nagpal, chief executive of Unicon Financial.
Satyam’s shares jumped as much as 40 per cent on Friday to 28.40 rupees after the government doubled the size of the board, but the stock has still lost over 80 percent of its value since the massive fraud was revealed.
Many questions about the accounting scandal remain to be answered: how large is it, who benefited, and how did the perpetrators manage to conceal it for so long?
Even if Satyam escapes a near-term cash crunch, it faces a long road to recovery. The new board will have to keep clients from defecting to Satyam’s rivals, fend off a growing number of lawsuits over the scandal and try to rebuild investor trust.
TCS seems to have made most out of the Satyam’s fiasco. The World Bank project which was lost by Satyam, who got banned for seven years for data theft reasons, has been awarded to TCS, Tata Consultancy Services.
In an unusually delayed disclosure, the World Bank said it has awarded Tata Consultancy Services a chunk of the projects that were earlier given to Satyam Computers.
The Bank had barred Satyam from doing business with it for eight years beginning September 2008, months before the IT company was shaken by a Rs 7,800 crore accounting fraud at home. “We have hired Tata Consultancy Services (TCS) to do much of the IT work that Satyam used to do,” a World Bank spokesperson said. The projects were awarded to TCS the same month through competitive bidding an indication that the Bank is not specifically targeting Indian IT companies.
The Bank recently disclosed names of companies worldwide that have been barred from doing business with it for violating fraud and corruption guidelines. The list of companies included India’s third largest software exporter Wipro and another company, Megasoft.
When contacted, a TCS spokesperson said, “We bagged the contract from World Bank a long time back… early September last year.” However, he declined to give further details as the company is scheduled to announce its quarterly results on January 15. Earlier, analysts had warned that after the fiasco, a large number of Satyam’s clients may desert it. The projects were awarded to TCS through competitive bidding but the details of the contract were not divulged by the Bank.
Post the goof up by PwC in failing to identify the cooking up of Satyam’s books, during their audits, new audit firms have been assigned for caarrying out the audit of Satyam Computer Services.
Deloitte Haskins & Sells and KPMG, both part of the Big Four accounting firms, have been appointed as joint statutory auditors for Satyam Computer Services.
The newly-constituted three member board of Satyam had earlier said that it would appoint new joint auditors to audit the accounts of Satyam, following the software company’s former chairman B Ramalinga Raju’s admission of having forged the books over the past seven years.
When contacted, both Deloitte and KPMG declined to comment on the issue. Sources in the Institute of Chartered Accountants of India, the apex body for accountants in the country, had earlier said that the new board had been wanting to appoint firms from the Big Four - Price Waterhouse, the earlier auditor of Satyam is also part of the Big Four - as the new auditor. Ernst & Young is the other firm in the four member premier league of global accounting firms.
In the wake of the Satyam scam, the U.S banks and insurance companies have hit the panic button and have cancelled the credit card of almost all U.S. based Satyam employees.
Last week, employees in the US received a letter from Northwest Federal Credit Union that their credit card accounts had been terminated. In its communication, a copy of which is with ET, the financial co-operative said, “This decision is based upon our reinvestigation and reevaluation of your (employees’) credit information as it pertains to employment.”
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