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Fraud Indian IT giant Satyam’s chief B. Ramalinga Raju’s admital of fraud of 7,100 crore has sent shockwaves across the financial sectors in India. He had admitted to the Board of Directors that accounts were fudged over several years. It must be learnt that Satyam is India’s fourth largest Information technology company. He confessed that company’s liabilities were understated while the debtor position was overstated. He also confessed that company’s bank balance of 5,040 crore and the accrued interest of Rs. 376 crore never existed. apologizing to all ‘Satyamites and stakeholders’ he said, ‘The gap in the balance sheet has arisen purely on account of inflated profits over a period of last several years. Every attempt made to eliminate the gap failed’. With this development, company shares rates have fallen almost 80 percent. Company shares that were selling at 179.10 closed at 39.95 after Raju’s disclosure. Satyam has 53,000 employees and operates in 65 countries. It is said that it has 5000 client companies across the world.

Cover-up Attempt But he also stated that neither he ‘nor the Managing Director took even one rupee/dollar from the company and have not benefited in financial terms on account of the inflated results’. This indicates that even the top company officials were not aware of company’s financial condition till the ‘last moment’. The whole of the drama had started three weeks ago when Satyam had to abandon its attempt to acquire Maytas Infra and Maytas Properties, promoted by Mr. Raju’s sons, on December 16. It looks that this move had been taken to ‘cover-up’ the financial irregularities. But the company had to back tract because of shareholders’ objections.

Investigation The Securities and Exchange Board of India (SEBI) and the Registrar of Companies (RoC) had begun investigations at the company’s offices after the7, 100 crore fraud surfaced in Satyam Computers. SEBI team had visited many Satyam offices and had seized books and records. There were rumors that Satyam chief has fled the country but his advocate S. Bharat Kumar denied such reports and said, ‘Mr. Raju is very much available in Hyderabad.’ Centre government has decided to cover eight more firms in which Ramalinga Raju and his family members have their assets. This includes Maytas Properties, Maytas Infra and Satyam BPO. The government has dissolved the existing boards and has decided to form a new board to run the ‘falling tower’. Meanwhile, Ramalinga Raju along with his four close relatives had surrendered before the Andhra Pradesh government on January 8. But on the other hand Andhra police claimed that they had not surrendered but were arrested by the police team. It is being said that Satyam chief will have to face almost 10 cases. It is being said that Raju had diverted the Satyam profits to finance and maintain the Maytas Infra. It involves the buying land in and out of the state and many other company assets. Meanwhile many banks who deal with Satyam have submitted their business deals with Satyam to the Reserve Bank of India. There are some reports that some banks had extended loans to Satyam.

This fraud has sent wrong signals across the world about Indian IT sector. Indian IT sector is already suffering badly because of International financial crisis and this development will deteriorate the condition. On the other hand it has also exposed the failure of Indian financial system that failed to notice the ‘years old financial fraud’.