Indian Satyam IT scandal updates

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1. Guest2681
   

   Ramalinga Raju, who said the firm had exaggerated cash reserves by some $1bn (£661m), and his brother Rama have been charged with criminal conspiracy.
   
   Police have also detained Vadlamani Srinivas, Satyam's chief financial officer, for questioning.
   
   The affair is India's biggest-ever corporate fraud.
   
   Mr Raju, formerly chairman, and his brother, formerly managing director, have been charged with criminal conspiracy, forgery, criminal breach of trust and falsifying documents, S.K Kumudi, a senior police officer, said.
   
   They could face life in prison, he added.
   
   The company, which employs 53,000 people and brought in about $40bn last year, is now fighting for its life. Its clients include Nestle, General Electric and Ford.
   
   Satyam is a publicly traded company, but, in exceptional circumstances, the government can step in.
   
   The government said on Saturday that a new board would meet within seven days.
   
   "We are working on the names," Prem Chand Gupta, the Corporate Affairs Minister, told reporters.
   
   The scandal comes at a tough time for Indian companies, already hit by the global slowdown and faltering growth in India, one of Asia's tiger economies.
   
   Mr Gupta expressed concern that the affair could blight India's reputation.
   
   "The Satyam case is an aberration," he said. "The credibility of the Indian corporate sector in general, and IT sector in particular, should not be allowed to suffer because of this."
   
   Satyam's shares fell to 11.50 rupees on Friday, their lowest level since March 1998. Last year they hit a high of 544 rupees.

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2. Guest5541
   

   The boss of Satyam, India's fourth-biggest software firm, has quit after revealing false accounts including some $1bn (£663m) in fictitious reserves.
   
   Chairman Ramalinga Raju apologised and said "the gap in the balance sheet has arisen purely on account of inflated profits" during several years.
   
   He said he was subjecting himself to the laws of the land and would "face the consequences".
   
   India's benchmark index fell nearly 7% on the news, as Satyam stock shed 82%.
   
   In a letter to the board of directors, Mr Raju said that neither he nor the managing director took any money from the company and did not benefit in financial terms following the "inflated results".
   
   He added that no board member had been aware of the situation the firm was in.
   
   "What started as a marginal gap between actual operating profits and the one reflected in the books of accounts continued to grow over the years," said Mr Ramalinga's statement, which was sent to the stock exchange.
   
   "It was like riding a tiger, not knowing how to get off without being eaten," he said.
   
   Satyam specialises in business software and benefited from the IT outsourcing boom.
   
   "We have to go beyond this letter and find out what actually has happened," the Securities and Exchange Board of India told reporters.
   
   "This is an issue which has very serious implications... It also raises the issue of authenticity of accounts that have been audited and certified by the auditors."
   
   Hitesh Agrawal, head of research with Angel Broking, said: "Indian corporate governance standards have been put at stake here, the role of the auditors have also come under serious question".
   
   The BBC's Sanjoy Majumder in Delhi says analysts see this as one of the worst crises to have hit corporate India, at a time when the country was hoping to attract foreign investors looking for quick gains in emerging markets.
   
   Our correspondent says many fear that the international community will now take a harder look at Indian companies and think twice about placing their money there.
   
   The news comes after plans to acquire Maytas Properties and plans to acquire a 51% stake in Maytas Infra failed.
   
   "The aborted Maytas acquisition deal was the last attempt to fill the fictitious assets with real ones," said the letter.
   
   Mr Raju said a task force investigating the failed deal had been set up. He also recommended to the board that Merrill Lynch be entrusted with the talk of "quickly exploring" merger opportunities.
   
   BBC correspondent Karishma Vaswani in Mumbai says the consequences for corporate India are extremely dire, given that Satyam is not just listed on Indian stock markets, but was also the first Indian technology firm to list on the hi-tech US Nasdaq market.
   
   Satyam said its managing director and co-founder B Rama Raju, Raju's brother, had also resigned. The company did not give any reason for the resignation.
   
   Just three months ago, Satyam received an award from a group of Indian directors for excellence in corporate governance.

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3. Guest1456
   

   The Satyam scandal has shocked India.
   
   It is being called India's Enron.
   
   Many in the financial circles are dismayed that the biggest-ever corporate fraud in the country could have escaped unnoticed for so many years.
   
   It has brought into question the levels of corporate governance in the country, and has cast an ugly shadow on the once shining image of Indian industry overseas.
   
   For the last couple of days outside the Bombay Stock Exchange, all anyone can talk about at the chai stalls and sandwich stores is how Ramalinga Raju, the former boss of Satyam Computers, managed to rack up a billion-dollar fraud right under their noses.
   
   Investors in Indian shares were stunned by Mr Raju's revelation, in a letter to the stock exchange this Wednesday, when he confessed his wrongdoing and admitted that he had effectively cooked the books of his firm for the last several years.
   
   Satyam's shares plummeted on the news by 75%, dragging down India's stock main market by 7%.
   
   "I can't believe it," says investor Rajiv Gupta outside the stock market.
   
   "It's very worrying, and it's happened at the worst possible time. Markets here were just started to look like they were recovering. But this news - it is very very bad."
   
   Ashok Bakliwal, another investor, agrees:
   
   "This will put the spotlight on Indian companies, and overseas investors will be wary of putting their money here without taking a good, hard look at the company's books."
   
   "As if India wasn't going through enough of a bad time - now this? I really don't know what will happen next. How could a fraud of this magnitude take place and go unnoticed? "
   
   The controversy has got many in corporate circles here wondering whether it was India's new found love affair with capitalism that led to Satyam's downfall.
   
   In the letter to his shareholders, Mr Raju says that he was trying to cover up the losses at Satyam, and in doing so got caught up in a vicious cycle of lies and debts.
   
   He says this attempt to hide the losses from investors and shareholders was like "riding a tiger, not knowing how to get off without being eaten".
   
   According to Mr Raju's statement, about $1bn (£0.65bn), or 94% of the cash on the company's books, was made up - and analysts say it was the manipulation of the cash flow which could have been one reason why the deceit was undetected.
   
   Many analysts also say that the chase for huge profits, and the desire to keep up with the break-neck speed of India's $50bn outsourcing industry's growth rates that may have been behind Mr Raju's motivation in fudging the accounts at his firm.
   
   But trying to get any answers from Mr Raju since his confession letter is proving to be impossible , he has disappeared.
   
   A company spokesperson has been quoted as saying that his whereabouts remain unclear for now.
   
   At a company press conference on Thursday, the acting chief executive Ram Mynampati told journalists that he and other board members had no knowledge of the financial fraud and were hoping to get back to business as soon as possible.
   
   "Our only aim at this time is to ensure that the business continues," Mr Mynampati says.
   
   But it will be some time before it is business as usual for the troubled tech firm.
   
   Indian media is reporting that financial regulators have despatched investigators to Hyderabad to launch a formal investigation into the case.
   
   India's main stock exchanges have announced they are removing Satyam Computers from their indices as of January 12 because of the stunning revelations
   
   Leading members of Indian industry have also expressed their shock and disappointment that such an audacious act of deception could take place.
   
   Chanda Kochar, the joint managing director of ICICI Bank, one of India's biggest lenders, says she is shocked by the news.
   
   "It's a wake-up call - but I would like to say that it's important to remember this is an isolated event and shouldn't be seen as a barometer for the general level of corporate governance in India," she says.
   
   "But it is also important for us to monitor the auditors and the other players in this scandal, and for us to become a lot more careful."
   
   But caution alone may not be enough to convince international investors that Indian companies are serious about cleaning up their governance
   
   Many of Satyam's customers were persuaded to get into business with the company because of Mr Raju's suave, professional image.
   
   The Western educated MBA graduate was one of the poster boys of India's new economy.
   
   But with his whereabouts unclear, and investigations continuing, the shock waves of this scandal will continue to damage the image of corporate India overseas.

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