Corporate Governance Fraud Satyam Computers Services Ltd.
By Abdur Rashid Mirza
Introduction of Satyam Computers
Satyam Computer Services Ltd. is a consulting and information technology services company based in Hyderabad, India . It was found in 1987 by B.Ramalinga Raju. The company offers information technology (IT) services spanning various sectors, and is listed on the New York Stock Exchange and Euronext. It is considered as an icon among the IT companies and at one point had over a billion dollar revenue
Introduction of Satyam Computers
Satyam's network covers 67 countries
across six continents. The company employs 40,000 IT professionals across development centers in India, the United States, the United Kingdom, the UAE, Canada, Hungary, Singapore, Malaysia, China, Japan, Egypt and Australia. It serves over 654 global companies
Introduction of Satyam Computers
Satyam has strategic technology and marketing alliances with over 50 companies.
Apart from Hyderabad, it has development centers in India at Bangalore, Chennai, Pune, Mumbai, Nagpur, Delhi, Kolkata, Bhubaneswar, and Visakhapatnam.
Satyam Maytas
Satyam on
Computers had December 16, 2008, announced that it will acquire two group firms Maytas properties and Maytas Infra.
Reaction of Investors after the announcement of accusation of Maytas
Brokerage house CLSA opposed to this decision.
Result of Investors Reaction
Sudden a collapse in the price of
the companys stock and a shocking declaration of financial manipulation (The act of artificially inflating or deflating the price of a security. In most cases, manipulation is illegal.) and fraud from its chairman, B. Ramalinga Raju
WHY HE FAILED???? The promoters decided to inflate the revenue and profit figures of Satyam. In the event, the company had a huge hole in its balance sheet, consisting of non-existent assets and cash reserves that have been recorded and liabilities that are unrecorded
Confession
He tried to fill the gap b/w actual profits of the company and the profits that were shown in records, balance sheets etc. and also tried to cope up the situation till last minute . But now the situation were beyond his hands and therefore he confessed the frauds(on Jan 7, 2009) made by him by showing inflated profits in the balance sheet
According to theconfessional statement of Mr. Raju, the balance sheet shortfall was more than Rs.7000 crore.
WHAT WENT WRONG?
Simple manipulation of revenues and earnings To show superior performance Raising fictitious bills for services that were never rendered. To increase the Cash & bank balance correspondingly. Operating profits were artificially boosted from the actual Rs 61 crore to Rs 649 crore.
AND HOW.?????
Its financial statements for years were totally false, cooked up and...
Never had Rs 5064 crores (US$ 1.05 Billion)
shown as cash for several years. Its liability was understated by $ 1.23 Billions The Debtors were overstated by 400 millions plus. The interest accrued and receivable by 376 Millions never existed
Satyam scam: So who is to blame?
Who is guilty in this
sordid state of events? Raju is by far the father of this fraud. But there were others who are also culpable.
Satyam's auditors
So what were the auditing company, Pricewater houseCoopers, doing? PwC has written a letter to the BOD of Satyam that its audit may be rendered "inaccurate and unreliable" due to the disclosures made by Satyam's (ex) Chairman.
Is it real? How could Auditors miss the gaping hole when
Auditors do bank reconciliation to check
whether the money has indeed come or not. They check bank statements and certificates. So was this a total lapse in supervision or were the bank statements bogus? No one knows yet. The company officials said they relied on data from the reputed auditors.
Other company bigwigs
Satyam's CFO Srinivas
Vadlamani has already been arrested. But could only two or three people have managed to cook the books for years of a company so large? Highly unlikely.
The bankers
If the auditors were Criminal,
it means that either the bank statement and certificates were faked. Satyam's banks -- ICICI Bank, HDFC Bank, Bank of Baroda, etc
Directors and independent directors
Despite the shareholders not being taken into confidence, the directors went ahead with the management's decision.
The government government too is The
equally guilty in not having managed to save the shareholders, the employees and some clients of the company from losing heavily.
Change the name of the company. Reconstitution of the board :-
Restore the management of the company and appoint some reputed people as the board of directors. Try building confidence in the clients to get back the lost projects. The image of the company could be revived by a series of press conferences highlighting the ongoing contracts with the clients. It could also be merged with any other software company.
Dont try this at own
