Fraud-hit outsourcer Satyam Computer Services Ltd said on Tuesday its new government-appointed board had appointed bankers and management advisors to identify strategic investors and obtain expressions of interest.
The board has appointed Boston Consulting Group as management advisors and Goldman Sachs and Avendus, an Indian investment bank, as investment bankers, the company said in a statement.
The board said it had also concluded most discussions related to immediate funding requirements, but did not specify details.
It said it would pay January salaries as scheduled from internal accruals and receiveables.
(For full coverage on Satyam click http://in.reuters.com/news/globalcoverage/satyamstory)
(For Quotes and Interactive Charts of Satyam Computer Services click http://in.reuters.com/money/quotes/chart?symbol=SATY.BO)
Showing posts with label Satyam Computers. Show all posts
Showing posts with label Satyam Computers. Show all posts
Investigations on real staff strength of Satyam
Hyderabad: Is the 53,000 employees’ number as claimed by Satyam Computer Services correct or does it have only 40,000 , as presented by the legal Counsel to CID in a City Court?
The six-member, Government-appointed Board, which deliberated two days on ‘salvaging’ the scam-hit company, said prima facie there appears to be no basis to doubt the number of associates. The independent investigation process is expected to reaffirm this fact in the coming weeks.
The Serious Fraud Investigating Office, which is probing the Satyam financial fraud, has reportedly sent an email to some employees at random to verify their email IDs. The objective was to seek an answer to the existence or otherwise of fictitious employees.
A brief questionnaire, seeking basic factual information has been mailed. In case of an auto-generated response, it could be construed as fictitious, a Satyam employee told Business Line.
Maintaining that the headcount was 53,000, T. Hari, Satyam’s Head of Marketing and Communication, said the company ran a headcount scan twice on Thursday (following claims of CID that the staff number might be inflated by up to 25 per cent).
He said there were two ways of ascertaining this – by checking the e-mails and active IDs, and by verifying the swipe cards across geographies.
“We have multiple ways of validating the number of associates. We do background checks for experience claims of all the senior guys joining the company.
“We check all the claims of academic and experience at this level,” he said.
“We have completed the process in September 2008. You can’t appraise a person who is not there.” The Satyam employees also got an e-mail from the Global Head (HR), S.V. Krishnan, on Friday, in which a further explanation was given. It stated that the information about headcount was maintained on SAP database.
While for the entry-level associates a bank guarantee exists (campus recruits), there was background verification in the case of lateral hires and off campus recruits.
Also the headcount in subsidiaries like the BPO and registered companies in China, Brazil, Malaysia and Egypt were included.
Maytas Infra CEO Madhav resigns
Hyderabad: Maytas Infrastructure's CEO PK Madhav, facing a criminal case relating to a non-banking finance company, resigned from the company on Monday saying legal matters concerning Nagarjuna Finance was taking much of his time.
"Madhav has expressed his inability to continue as the CEO of the company in view of his attention and energy being used to address the legal matters pertaining to the Nagarjuna Finance case," Maytas Infra said in a statement.
The news of the resignation came even as the Union Government ordered a serious fraud probe into the company's affairs in relation to a Rs 7,800 crore fraud in Satyam Computer founded by Ramalinga Raju.
Madhav was associated with the crisis-ridden Maytas Infrastructure, also promoted by Raju's family, since May 2006 and helped the company grow to the present status. Among others, it has won the Hyderabad Metro project.
His resignation is effective from January 14, 2009. Madhav was arrested along with the Nagarjuna group chairman KS Raju on December 16 and was sent for judicial custody till December 29, facing charges of defaulting on payments to its depositors on maturity, when he was director of Nagarjuna Finance.
At present, both Madhav and Raju have been released on conditional bail.
Maytas Infra said that its board will find suitable replacement for the CEO's position. As of now, Teja Raju, vice chairman of the company is looking after the administration and other operational functions.
Earlier this month, Maytas Infra's non-executive director and chairman RC Sinha had resigned from the company. The board is left with RP Raju, Teja Raju and Chander Sheel Ansal.
As of September 2008, Teja Raju held 2.53 per cent stake in the company, while the promoter group (Raju family) controlled 36 per cent.
It was Satyam's move to acquire Maytas Infra as also Maytas Properties that had first exposed trouble in the IT firm. Raju has since admitted to cooking Satyam's books and is in police custody.
The Centre ordered a probe by Serious Fraud Investigation Office into the affairs of the two Maytas firms to get to the bottom of the Satyam episode.
"Madhav has expressed his inability to continue as the CEO of the company in view of his attention and energy being used to address the legal matters pertaining to the Nagarjuna Finance case," Maytas Infra said in a statement.
The news of the resignation came even as the Union Government ordered a serious fraud probe into the company's affairs in relation to a Rs 7,800 crore fraud in Satyam Computer founded by Ramalinga Raju.
Madhav was associated with the crisis-ridden Maytas Infrastructure, also promoted by Raju's family, since May 2006 and helped the company grow to the present status. Among others, it has won the Hyderabad Metro project.
His resignation is effective from January 14, 2009. Madhav was arrested along with the Nagarjuna group chairman KS Raju on December 16 and was sent for judicial custody till December 29, facing charges of defaulting on payments to its depositors on maturity, when he was director of Nagarjuna Finance.
At present, both Madhav and Raju have been released on conditional bail.
Maytas Infra said that its board will find suitable replacement for the CEO's position. As of now, Teja Raju, vice chairman of the company is looking after the administration and other operational functions.
Earlier this month, Maytas Infra's non-executive director and chairman RC Sinha had resigned from the company. The board is left with RP Raju, Teja Raju and Chander Sheel Ansal.
As of September 2008, Teja Raju held 2.53 per cent stake in the company, while the promoter group (Raju family) controlled 36 per cent.
It was Satyam's move to acquire Maytas Infra as also Maytas Properties that had first exposed trouble in the IT firm. Raju has since admitted to cooking Satyam's books and is in police custody.
The Centre ordered a probe by Serious Fraud Investigation Office into the affairs of the two Maytas firms to get to the bottom of the Satyam episode.
Serious Fraud Investigation Office to probe Satyam-Maytas nexus
New Delhi, Jan 19 (IANS) The government Monday ordered a probe into possible 'nexus' between the fraud-hit Satyam Computer Services and its tainted founder B. Ramalinga Raju's two family-run firms Maytas Properties and Maytas Infrastructure.
The Serious Fraud Investigation Office (SFIO), which is already probing the Rs.
70 billion ($1.4 billion) Satyam scam, has also been given the mandate to probe the nexus, Corporate Affairs Minister P.C. Gupta told reporters here.
'The inspectors investigating the matters relating to Satyam have informed (the government) about the apparent nexus between the events that have taken place at Satyam and Maytas Properties and Maytas Infrastructure,' he said.
'Therefore, the government, in exercise of its powers under the Companies Act, 1956, has approved and authorized the inspectors to obtain such books, records, papers as they deem necessary,' he added.
'I would like to say the government will leave no stone unturned to obtain full facts of the case, to ascertain the extent and nature of the irregularities that may have been committed relating to Satyam,' the minister said, adding: 'The guilty will be punished.'
The Serious Fraud Investigation Office started functioning Oct 1, 2004, and was set up against the backdrop of the stock market scam, the failure of non-banking finance firms, and the phenomena of vanishing companies and plantation firms.
Formed under the ministry of corporate affairs, it has under its wing experts in fields like capital markets, accountancy, forensic audit, taxation, company law, IT, customs and investigation.
Based on the probes since inception, the office has filed 671 cases under the Companies Act and 68 cases under the Indian Penal Code.
The Hyderabad-based infrastructure company is one of the two realty firms that are run by the two sons of Raju, who is the chief promoter with 36 percent equity holding.
The aborted bid to acquire the two firms - Maytas Infra and Maytas Properties - for $1.6 billion (Rs.79.2 billion/Rs.7,920 crore) by the fraud-tainted Satyam led to an unprecedented crisis in the global software major, resulting in a spate of resignations by four directors and subsequently by Raju.
In a related development earlier in the day, Maytas Infra chief executive and whole-time director of P.K. Madhav resigned, the company informed the Bombay Stock Exchange (BSE).
The Serious Fraud Investigation Office (SFIO), which is already probing the Rs.
70 billion ($1.4 billion) Satyam scam, has also been given the mandate to probe the nexus, Corporate Affairs Minister P.C. Gupta told reporters here.
'The inspectors investigating the matters relating to Satyam have informed (the government) about the apparent nexus between the events that have taken place at Satyam and Maytas Properties and Maytas Infrastructure,' he said.
'Therefore, the government, in exercise of its powers under the Companies Act, 1956, has approved and authorized the inspectors to obtain such books, records, papers as they deem necessary,' he added.
'I would like to say the government will leave no stone unturned to obtain full facts of the case, to ascertain the extent and nature of the irregularities that may have been committed relating to Satyam,' the minister said, adding: 'The guilty will be punished.'
The Serious Fraud Investigation Office started functioning Oct 1, 2004, and was set up against the backdrop of the stock market scam, the failure of non-banking finance firms, and the phenomena of vanishing companies and plantation firms.
Formed under the ministry of corporate affairs, it has under its wing experts in fields like capital markets, accountancy, forensic audit, taxation, company law, IT, customs and investigation.
Based on the probes since inception, the office has filed 671 cases under the Companies Act and 68 cases under the Indian Penal Code.
The Hyderabad-based infrastructure company is one of the two realty firms that are run by the two sons of Raju, who is the chief promoter with 36 percent equity holding.
The aborted bid to acquire the two firms - Maytas Infra and Maytas Properties - for $1.6 billion (Rs.79.2 billion/Rs.7,920 crore) by the fraud-tainted Satyam led to an unprecedented crisis in the global software major, resulting in a spate of resignations by four directors and subsequently by Raju.
In a related development earlier in the day, Maytas Infra chief executive and whole-time director of P.K. Madhav resigned, the company informed the Bombay Stock Exchange (BSE).
B. Ramalinga Raju, Chairman, Satyam Computer Services Ltd Resignation letter
To 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 crore (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)
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 Satyam’s 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 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.
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.
I am now prepared to subject myself to the laws of the land and fact the consequences thereof.
(B. Ramalinga Raju)
Copied marked to:
1) SEBI Chairman
2) Stock Exchanges
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 crore (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)
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 Satyam’s 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 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.
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.
I am now prepared to subject myself to the laws of the land and fact the consequences thereof.
(B. Ramalinga Raju)
Copied marked to:
1) SEBI Chairman
2) Stock Exchanges
Satyam Computers Chairman Ramalinga Raju resigns
Shares of Satyam Computer Wednesday crashed by over 72 percent to Rs.50 from a opening of Rs.179.10 on the bourses around 1 p.m., following the resignation of its founder-chairman B. Ramalinga Raju after he admitted to a Rs.40 billion (Rs.4,000 crore or $823 million) fraud - the largest in India Inc.
Satyam’s managing director B. Rama Raju also quit, three days before the re-scheduled board meeting here Jan 10. The resignations caught the market, investors and analysts by surprise.
While resigning, Ramalinga Raju also admitted to a fraud being committed to the tune of Rs.40 billion (Rs.4,000 crore or $823 million) in the balance sheet of the company.
In a regulatory statement, Raju said the software services firm had fraudulently incorporated a non-existent cash component and inflated the bank balance to reflect Rs.5,040 crore (Rs.50.4 billion or $1.04 billion) as against Rs.5,361 crore (Rs.53.61 billion or $1.1 billion).
‘Ramalinga Raju and Rama Raju shall continue in their position till such time the board is expanded and their continuance is to ensure enhancement of the board,’ the company said.
Ramalinga Raju’s resignation is a culmination of the crisis triggered by the management’s aborted bid to acquire Maytas Properties and Maytas Infra for $1.6 billon (Rs.79.2 billion or Rs.7,920 crore) Dec 17 after institutional investors revolted against the controversial deal.
Satyam also informed the stock exchanges that the company had terminated the services of global financial advisory firm DSP Merrill Lynch, which was engaged to advise the board at the reconvened meeting Jan 10.
The Maytas’ deal fiasco also led to the exit of four independent directors from the board in succession over the last weeks.
Global technology research firm Forrester Research sounded its clients Dec 31 that the beleaguered company was heading for a major shakeout or a possible takeover as a consequence of its management’s bid to diversify from core IT business into realty sector by dipping into cash reserves of $1.2 billion (Rs.53 billion/Rs.5,300 crore).
Satyam’s managing director B. Rama Raju also quit, three days before the re-scheduled board meeting here Jan 10. The resignations caught the market, investors and analysts by surprise.
While resigning, Ramalinga Raju also admitted to a fraud being committed to the tune of Rs.40 billion (Rs.4,000 crore or $823 million) in the balance sheet of the company.
In a regulatory statement, Raju said the software services firm had fraudulently incorporated a non-existent cash component and inflated the bank balance to reflect Rs.5,040 crore (Rs.50.4 billion or $1.04 billion) as against Rs.5,361 crore (Rs.53.61 billion or $1.1 billion).
‘Ramalinga Raju and Rama Raju shall continue in their position till such time the board is expanded and their continuance is to ensure enhancement of the board,’ the company said.
Ramalinga Raju’s resignation is a culmination of the crisis triggered by the management’s aborted bid to acquire Maytas Properties and Maytas Infra for $1.6 billon (Rs.79.2 billion or Rs.7,920 crore) Dec 17 after institutional investors revolted against the controversial deal.
Satyam also informed the stock exchanges that the company had terminated the services of global financial advisory firm DSP Merrill Lynch, which was engaged to advise the board at the reconvened meeting Jan 10.
The Maytas’ deal fiasco also led to the exit of four independent directors from the board in succession over the last weeks.
Global technology research firm Forrester Research sounded its clients Dec 31 that the beleaguered company was heading for a major shakeout or a possible takeover as a consequence of its management’s bid to diversify from core IT business into realty sector by dipping into cash reserves of $1.2 billion (Rs.53 billion/Rs.5,300 crore).
Satyam barred from World Bank business: WB spokesman
Mumbai: India’s Satyam Computer Services has been barred from business with the World Bank, a spokesman for the World Bank said on Tuesday, confirming a report by Fox News.
“The information is true,” Sudip Mozumder, a spokesman for the World Bank in New Delhi, told Reuters.
Shares in the Hyderabad-based firm closed down 13.55%, at Rs140.40, day’s highest loss on the index.
According to a report by Fox News Satyam was barred last February from all business at the bank for an eight-month period on account of an alleged data theft.
Fox News had reported the scandal about ultrasensitive data heists by Satyam Computers, but complying with its secrecy policy the World Bank denied reports.
Read the FOX story on the revelation
Satyam questioning the validity of the FOX scandal report in a defensive statement released earlier had said: “The story that claims Satyam was involved in an alleged security breach at the World Bank has no validity. Satyam takes this matter very seriously. We hold ourselves to the highest standards in the industry, and we take extraordinary care to develop secure networks and IT infrastructure for all our clients.”
According to FOX reports the Satyam case had been turned over to the Justice Department in 2006 as well as to the US Treasury Department but no legal action against the company is known as yet.
“The information is true,” Sudip Mozumder, a spokesman for the World Bank in New Delhi, told Reuters.
Shares in the Hyderabad-based firm closed down 13.55%, at Rs140.40, day’s highest loss on the index.
According to a report by Fox News Satyam was barred last February from all business at the bank for an eight-month period on account of an alleged data theft.
Fox News had reported the scandal about ultrasensitive data heists by Satyam Computers, but complying with its secrecy policy the World Bank denied reports.
Read the FOX story on the revelation
Satyam questioning the validity of the FOX scandal report in a defensive statement released earlier had said: “The story that claims Satyam was involved in an alleged security breach at the World Bank has no validity. Satyam takes this matter very seriously. We hold ourselves to the highest standards in the industry, and we take extraordinary care to develop secure networks and IT infrastructure for all our clients.”
According to FOX reports the Satyam case had been turned over to the Justice Department in 2006 as well as to the US Treasury Department but no legal action against the company is known as yet.
Satyam fraud may catch Maytas cos in its vortex
New Delhi: The magnitude of accounting fraud at Satyam Computer Services Ltd could be far larger than what has been admitted by the firm’s chairman B. Ramalinga Raju, and resultant investigations could extend to the Raju family-run Maytas Properties Ltd and Maytas Infra Ltd, forensic accountants said.
Accounting frauds typically are built on a series of fictitious transactions, and unravelling them leads to numbers bigger than what is stated, accountants said.
According to Raju’s letter on Wednesday to Satyam’s governing board members, the 30 September balance sheet has fudged entries with an aggregate value of Rs7,136 crore, which includes a fictitious cash balance of Rs5,040 crore.
“There is enough evidence to suggest there needs to be a detailed forensic investigation,” , partner at audit and tax consultancy firmVishesh C. Chandiok Grant Thornton India, said.
Chandiok’s colleague, Anil Roy, who heads the firm’s forensic accounting team, said such frauds rapidly grow in proportion as the ambit of the investigation expands. “If the first fraud is for Rs100, the next time add another zero. It (accounting fraud) grows exponentially,” he said.
Forensic accounting teams pool multidisciplinary resources to provide an accounting analysis that is in line with what courts want. Grant Thornton’s forensic accounting team, for instance, has a mix of qualified accountants and former police officers who bring to the table investigative skills in unravelling fictitious transactions.
In Satyam’s case, Raju’s revelation is unlikely to be the full story, another expert said. “This is the tip of the iceberg. Maytas will be dragged into this,” predicted Deepankar Sanwalka, head of forensic accounting practice at audit and consultancy firm KPMG, pointing to the likelihood that New York Stock Exchange-listed Satyam would also fall under the jurisdiction of the US’ Securities and Exchange Commission (SEC). “People will realize when SEC gets into investigating, it can be tough.”
According to Raju’s letter, the attempt in December to merge the two Maytas companies with Satyam was part of broader attempts to transform fictitious accounting entries under cash and bank balances on the tech vendor’s books into real investments.
When faced with a case such as Satyam’s, which involves unravelling a chain of fictitious transactions, Roy said he would demarcate the accounts into blocks of two-three years. Once the forensic accountants went over a block’s books with a fine-tooth comb, they would get a good idea about when the fraud started, he added.
Raju’s letter on Wednesday said the accounts had been fudged over the last few years, and an important part of it showed up in the form of inflated cash and bank balances of Rs5,040 crore.
“Cash and bank balances are one of the easiest things to audit (for an external auditor),” Sanwalka said.
An audit consultant from another firm, who did not want to be named, said there are instances overseas of clients intercepting banks’ confirmation messages to external auditors on the exact cash position to hide fraud.
A popular saying that captures the process of accounting fraud of the kind Satyam has likely engaged in is, “You have to say a hundred lies to cover the first lie,” Chandiok said.
Raju’s letter indicated the promoters had lost control of the situation. “It was like riding a tiger, not knowing how to get off without being eaten.”
The consequences of Raju riding the proverbial tiger are likely to be felt by other Indian companies. “It (Satyam’s case) throws a big question on real corporate governance standards in India. There are going to be long-term ramifications,” Sanwalka said.
Accounting frauds typically are built on a series of fictitious transactions, and unravelling them leads to numbers bigger than what is stated, accountants said.
According to Raju’s letter on Wednesday to Satyam’s governing board members, the 30 September balance sheet has fudged entries with an aggregate value of Rs7,136 crore, which includes a fictitious cash balance of Rs5,040 crore.
“There is enough evidence to suggest there needs to be a detailed forensic investigation,” , partner at audit and tax consultancy firmVishesh C. Chandiok Grant Thornton India, said.
Chandiok’s colleague, Anil Roy, who heads the firm’s forensic accounting team, said such frauds rapidly grow in proportion as the ambit of the investigation expands. “If the first fraud is for Rs100, the next time add another zero. It (accounting fraud) grows exponentially,” he said.
Forensic accounting teams pool multidisciplinary resources to provide an accounting analysis that is in line with what courts want. Grant Thornton’s forensic accounting team, for instance, has a mix of qualified accountants and former police officers who bring to the table investigative skills in unravelling fictitious transactions.
In Satyam’s case, Raju’s revelation is unlikely to be the full story, another expert said. “This is the tip of the iceberg. Maytas will be dragged into this,” predicted Deepankar Sanwalka, head of forensic accounting practice at audit and consultancy firm KPMG, pointing to the likelihood that New York Stock Exchange-listed Satyam would also fall under the jurisdiction of the US’ Securities and Exchange Commission (SEC). “People will realize when SEC gets into investigating, it can be tough.”
According to Raju’s letter, the attempt in December to merge the two Maytas companies with Satyam was part of broader attempts to transform fictitious accounting entries under cash and bank balances on the tech vendor’s books into real investments.
When faced with a case such as Satyam’s, which involves unravelling a chain of fictitious transactions, Roy said he would demarcate the accounts into blocks of two-three years. Once the forensic accountants went over a block’s books with a fine-tooth comb, they would get a good idea about when the fraud started, he added.
Raju’s letter on Wednesday said the accounts had been fudged over the last few years, and an important part of it showed up in the form of inflated cash and bank balances of Rs5,040 crore.
“Cash and bank balances are one of the easiest things to audit (for an external auditor),” Sanwalka said.
An audit consultant from another firm, who did not want to be named, said there are instances overseas of clients intercepting banks’ confirmation messages to external auditors on the exact cash position to hide fraud.
A popular saying that captures the process of accounting fraud of the kind Satyam has likely engaged in is, “You have to say a hundred lies to cover the first lie,” Chandiok said.
Raju’s letter indicated the promoters had lost control of the situation. “It was like riding a tiger, not knowing how to get off without being eaten.”
The consequences of Raju riding the proverbial tiger are likely to be felt by other Indian companies. “It (Satyam’s case) throws a big question on real corporate governance standards in India. There are going to be long-term ramifications,” Sanwalka said.
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