The Satyam Debacle

Early morning today B Ramalinga Raju — the founder of Satyam Computers, one of India’s largest IT companies — dropped a bombshell when he sent a five-page letter to the 2 stock exchanges confessing to one of the biggest frauds ever seen.

He as part of his confession letter revealed that Satyam had NO BALANCE SHEET and was cooking up the numbers to fool the share holders and independent directors since several quarters.

The markets reacted quickly to this news and Satyam's share[BSE:SATCOM] was down almost 75% at the end of days trading.The NYSE even stopped trading for the Satyam Computer ADR.

Raju is a well connected man in India. It would be interesting to see if law catches up with him. Even if he escapes in India, what about the SEC the federal agency that oversees the exchange of securities to protect investors in US? However US also is not free of corporate scandals. Enron, the recent Madoff $50B scandal are best examples for this. Will the US lawyers RUSH on behalf of Satyam shareholders to sue Raju?

This leavs us with many daunting questions about corporate governance in India and trasparancy in corporate audits.
How did the auditor sign the balance sheet?
Will that audit firm Price Waterhouse in India be asked to shut?
Is this a sign or a sample case, how (are) the highly honoured audit firms are working in India?
How did the World Council for Corporate Governance named the company winner as recently as in Sept 2008?!!

The word 'Satyam' in many Indian languages means 'Truth'. Unfortunately that is the name of this company where every corporate act was false.

It all started when Mr Raju Chairman of Satyam Computers decided to buy out ‘Maytas’ which is his son’s ailing infrastructure company.

With this move, Raju destroyed the image of India as an attractive investment destination and notion of corporate governance. Initial reports say that Ramalinga Raju may face criminal proceeding and 10 year jail term. The finance ministry has swung into action on the Satyam issue. It has asked stock market regulator Securities and Exchange Board of India (SEBI) and Ministry of corporate affairs to give a report on the issue.Market regulator SEBI on Wednesday, Jan 7 said it would take all steps under the law for which it has started discussions with government and bourses.

"We are in touch with Ministry of Corporate Affairs... we are also in discussion with them as to what steps need to be taken from the perspective of power they have under the law and SEBI has under the law," SEBI Chairman C B Bhave said. The National Association of Software and Service Companies (Nasscom) may look at banning Satyam Computer Services from its membership. "The entire incident came AS a shock to us. Also, this kind of a fiasco is an unprecedented one in the history of Nasscom.We are looking into the matter on what steps can be taken. Considering the magnitude and implications of the incident, we can even look at banning the company from Nasscom," said Ganesh Natarajan, Chairman of Nasscom.


Latest reports even suggest Raju has fled to Dubai to avoid getting arrested!!

If we look at the big picture here , its going to impact every body from Other IT biggies like Infosys,TCS and Wipro to the Auditing firms like Price Waterhouse..the most hit would be the poor employees and share holders of Satyam.My heart goes out for all my friends who either hold Satyam shares or are employees.