April 22nd, 2009
Report: Fraud and deception at Satyam was deep
The fraud and deception at Satyam Computer Services in India was so in-depth that it included dual accounting books, thousands of forged invoices, thousands of unnecessary employees and dozens of fake bank statements, according to court records analyzed by the New York Times.
Through the deception, managers, auditors and an adviser were able to create a perception that the company was “carrying out huge volumes of business” so it attract potential customers and investors, according to the NYT. All the while, cash was flowing into the hands of those who architected the deception.
In January, Satyam co-founder B Ramalinga Raju resigned from the company - India’s fourth largest outsourcing company - after admitting that this was an estimated $1 billion cash hole in the company’s balance sheet. Within days, Raju’s brother and company co-founder Rama Raju had been arrested, as well, and the company’s full board of directors were let go.
In addition, the company’s auditors are also facing charges. The Times, quoting from the court documents, reports:
The company’s auditors, S. Gopala Krishnan and Srinivas Talluri, who have been suspended from PricewaterhouseCoopers, both received figures from Satyam’s banks that were in “great variance with the figures provided by the management” but certified Satyam’s accounts anyway, the bureau said. In return, the bureau claims, the auditors received an “exorbitant audit fee” over and above the market rate.
Earlier this month, Satyam was sold to Venturebay Consultants, a subsidiary of Indian outsourcing firm Tech Mahindra. Venturebay Consultamts will pay $352 million for new shares representing a 31 percent stake in Satyam. From there, Satyam will make a public offer to buy another 20 percent of shares to reach a 51 percent controlling stake.
Sam Diaz is a senior editor at ZDNet. See his full profile and disclosure of his industry affiliations.
Subscribe to Between the Lines via Email alerts or RSS.
