Satyam scandal

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Lua error in package.lua at line 80: module 'strict' not found. The Satyam Computer Services scandal is a corporate scandal that worked in India in 2009 where chairman Ramalinga Raju confessed that the company's accounts had been falsified. The Global corporate community was shocked and scandalised when the chairman of Satyam, Ramalinga Raju resigned on 7 January 2009 and confessed that he had manipulated the accounts by US$1.47-Billion. In February 2009, CBI took over the investigation and filed three charge sheets (on 7 April 2009, 24 November 2009 and 7 January 2010), which were later clubbed into one. On 10 April 2015, Ramalinga Raju was convicted with 10 other members.

Role of Auditors

PricewaterhouseCoopers affiliates served as independent auditors of Satyam Computer Services when the report of scandal in the account books of Satyam Computer Services broke. The Indian arm of PwC was fined $6 million by the SEC (US Securities and Exchange Commission) for not following the code of conduct and auditing standards in the performance of its duties related to the auditing of the accounts of Satyam Computer Services.[1]

Aftermath

Ramalinga Raju along with 2 other accused of the scandal, had been granted bail from Supreme court on 4 November 2011 as the investigation agency CBI failed to file the chargesheet even after more than 33 months Raju being arrested.

Raju had appointed a task force to address the Maytas situation in the last few days before revealing the news of the accounting fraud. After the scandal broke, the then-board members elected Ram Mynampati to be Satyam's interim CEO. Mynampati's statement on Satyam's website said:

"We are obviously shocked by the contents of the letter. The senior leaders of Satyam stand united in their commitment to customers, associates, suppliers and all shareholders. We have gathered together at Hyderabad to strategize the way forward in light of this startling revelation."

On 10 January 2009, the Company Law Board decided to bar the current board of Satyam from functioning and appoint 10 nominal directors. "The current board has failed to do what they are supposed to do. The credibility of the IT industry should not be allowed to suffer." said Corporate Affairs Minister Prem Chand Gupta. Chartered accountants regulator ICAI issued show-cause notice to Satyam's auditor PricewaterhouseCoopers (PwC) on the accounts fudging. "We have asked PwC to reply within 21 days," ICAI President Ved Jain said.

On the same day, the Crime Investigation Department (CID) team picked up Vadlamani Srinivas, Satyam's then-CFO, for questioning. He was arrested later and kept in judicial custody.[2]

On 11 January 2009, the government nominated noted banker Deepak Parekh, former NASSCOM chief Kiran Karnik and former SEBI member C Achuthan to Satyam's board.

Analysts in India have termed the Satyam scandal India's own Enron scandal.[3] Some social commentators see it more as a part of a broader problem relating to India's family-owned corporate environment.[4]

Immediately following the news, Merrill Lynch (now a part of Bank of America) and State Farm Insurance terminated its engagement with the company. Also, Credit Suisse suspended its coverage of Satyam.[citation needed]. It was also reported that Satyam's auditing firm PricewaterhouseCoopers will be scrutinised for complicity in this scandal. SEBI, the stock market regulator, also said that, if found guilty, its license to work in India may be revoked.[5][6][7][8][9] Satyam was the 2008 winner of the coveted Golden Peacock Award for Corporate Governance under Risk Management and Compliance Issues,[10] which was stripped from them in the aftermath of the scandal.[11] The New York Stock Exchange has halted trading in Satyam stock as of 7 January 2009.[12] India's National Stock Exchange has announced that it will remove Satyam from its S&P CNX Nifty 50-share index on 12 January.[13] The founder of Satyam was arrested two days after he admitted to falsifying the firm's accounts. Ramalinga Raju is charged with several offences, including criminal conspiracy, breach of trust, and forgery.

Satyam's shares fell to 11.50 rupees on 10 January 2009, their lowest level since March 1998, compared to a high of 544 rupees in 2008.[14] In New York Stock Exchange Satyam shares peaked in 2008 at US$29.10; by March 2009 they were trading around US$1.80.

The Indian Government has stated that it may provide temporary direct or indirect liquidity support to the company. However, whether employment will continue at pre-crisis levels, particularly for new recruits, is questionable .[15]

On 14 January 2009, Price Waterhouse, the Indian division of PricewaterhouseCoopers, announced that its reliance on potentially false information provided by the management of Satyam may have rendered its audit reports "inaccurate and unreliable".[16]

On 22 January 2009, CID told in court that the actual number of employees is only 40,000 and not 53,000 as reported earlier and that Mr. Raju had been allegedly withdrawing ₹200 million (US$3 million) every month for paying these 13,000 non-existent employees.[17]

The Indian government designated A. S. Murthy to become the new CEO of Satyam effective 5 February 2009. Special advisors were also appointed, Homi Khusrokhan of Tata Chemicals and Chartered Accountant Partho Datta.[18][19]

On 15 September 2014, the special CBI court hearing the case has asked the concerned parties to appear before the court on 27 October. Date of judgement will be indicated later on that day.

On 9 April 2015: Raju and nine others found guilty of collaborating to inflate the company's revenue, falsifying accounts and income tax returns and fabricating invoices among other things and sentenced seven years imprisonment by Hyderabad court. Raju and his brother were also fined by the court 55 million rupees ($883,960) each.[20]

Acquisition by Mahindra Group

On 13 April 2009, via a formal public auction process, a 46% stake in Satyam was purchased by Mahindra & Mahindra owned company Tech Mahindra, as part of its diversification strategy. Effective July 2009, Satyam rebranded its services under the new Mahindra management as "Mahindra Satyam". After a delay due to tax issues[21][22] Tech Mahindra announced its merger with Mahindra Satyam on 21 March 2012, after the board of two companies gave the approval.[23][24] The companies are merged legally on 25 June 2013.[25][26]

See also

References

  1. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  2. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  3. ↑ Satyam scandal could be 'India's Enron' – World business- msnbc.com (updated 11:42 a.m. ET 7 January 2009)
  4. ↑ The Caste of a Scam: A Thousand Satyams in the Making. Kafila.
  5. ↑ Satyam scandal rattles confidence in accounting Big Four. In.reuters.com.
  6. ↑ ICAI to seek explanation from Satyam’s auditor PwC. Livemint.com (7 January 2009).
  7. ↑ Satyam auditor says examining chairman's statement. Reuters.com (7 January 2009).
  8. ↑ What happens to PWC, The Auditor For Satyam?[dead link]
  9. ↑ Satyam: Auditors' body to pull up PwC ICAI to seek explanation from Satyam’s auditor PwC. Rediff.com.
  10. ↑ http://www.goldenpeacockawards.com/GPA_RESULTS_ANNOUNCEMENT_2008.pdf
  11. ↑ Satyam stripped off Golden Peacock Global Awards – Software-Infotech-The Economic Times (8 Jan 2009, 0118 hrs IST, PTI)
  12. ↑ NYSE halts trading in Satyam stock – (Wednesday, 7 January 2009, 23:02) Sify.com
  13. ↑ Satyam Computer Services Ltd (SAY.N) Key Developments (Stocks) Reuters.com Archived 24 February 2009 at the Wayback Machine
  14. ↑ Indian IT scandal boss arrested – 9 January 2009 – Business – BBC NEWS
  15. ↑ Ready to bail out Satyam, if required: Govt. Moneycontrol.com (13 January 2009).
  16. ↑ Price Waterhouse says its Satyam audits relied on company information, could be wrong[dead link] – 14 January 2009 – Associated Press
  17. ↑ Satyam fudged FDs, has 40,000 employees: Public prosecutor. The Times of India.
  18. ↑ Satyam Names Murty as CEO to Replace Arrested Founder – (5 February 2009, 1813 hrs IST) Satyam Names Murty as CEO to Replace Arrested Founder
  19. ↑ A S Murty appointed as Satyam CEO – (5 Feb 2009, 1816 hrs IST) A S Murty appointed as Satyam CEO Kiran
  20. ↑ [1]
  21. ↑ moneycontrol.com. moneycontrol.com (15 February 2011).
  22. ↑ Mah Satyam-Tech Mah to appoint bankers to fasten merger. Moneycontrol.com (30 August 2011).
  23. ↑ /Tech Mahindra, Satyam get nod to merge. Livemint.com (21 March 2012).
  24. ↑ High Court orders shareholders' meeting on MSat-Tech Mahindra merger. Profit.ndtv.com (11 May 2012).
  25. ↑ Tech Mahindra completes Satyam merger, becomes 5th biggest IT firm – Economic Times. The Economic Times. (26 June 2013).
  26. ↑ Satyam is history, merger with Tech Mahindra complete | Business Line. Business Line. (25 June 2013).

External links

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