Satyam The Hidden Truth Ankur Chaudhary(610), Ankit Dudeja(635), Karan Gaba(650), Vipin(662), Abhishek Sharma(664), Vaibhav(667)

Ankur Chaudhary(610), Ankit Dudeja(635),

Karan Gaba(650), Vipin(662), Abhishek Sharma(664), Vaibhav(667)

T HE T RUTH S ERUM T RAILS Satyam's Rs 7,000-crore duplicity. Scale of monies and skullduggery involved and the worrying implications for India's IT sector. The Satyam saga puts the entire corporate food chain into question from directors and auditors to analysts and the media. Is the Satyam scandal just about a promoter manipulating the financial statements of his company to show a superior performance?

Satyam's Rs 7,000-crore duplicity.

Scale of monies and skullduggery involved and the worrying implications for India's IT sector.

The Satyam saga puts the entire corporate food chain into question from directors and auditors to analysts and the media.

Is the Satyam scandal just about a promoter manipulating the financial statements of his company to show a superior performance?

Satyam fraud: More than accounting skullduggery Lawyers have already expressed doubts over whether the statement can actually be deemed a confession and enough to implicate Mr. Raju. Indeed, they say that it is a very well drafted document designed to draw attention to the hole in the finances without implicating himself anywhere for any act of commission.

Lawyers have already expressed doubts over whether the statement can actually be deemed a confession and enough to implicate Mr. Raju. Indeed, they say that it is a very well drafted document designed to draw attention to the hole in the finances without implicating himself anywhere for any act of commission.

Deflecting attention? Nowhere has he said that he was responsible for this nor has he pointed his finger at anyone else. Of course, as the chairman, the buck stops with him but that is not the same as saying “I did it”. He has tried to project himself as the saviour by pointing out how he “arranged” Rs 1,230 crore for the company. The second event that raises doubts is the carefully orchestrated arrest of Mr Raju.

Nowhere has he said that he was responsible for this nor has he pointed his finger at anyone else. Of course, as the chairman, the buck stops with him but that is not the same as saying “I did it”.

He has tried to project himself as the saviour by pointing out how he “arranged” Rs 1,230 crore for the company.

The second event that raises doubts is the carefully orchestrated arrest of Mr Raju.

EVENT : The founder and Chairman of Satyam Computer Services, the Indian IT outsourcing company, confessed to fraudulently inflating profits, overstating assets and suppressing liabilities over several years. DETAILS OF THE FRAUD Bank balances, interest income and debtors were overstated to the extent of Rs50.4bn, Rs3.76bn and Rs4.9bn respectively. Liabilities were understated by Rs12.3bn. The adjusted book value works out to Rs18.4 per share against a reported book value of Rs124.3 per share and the pre-fraud revelation stock market price of Rs178.953 per share.

The founder and Chairman of Satyam Computer Services, the Indian IT outsourcing company, confessed to fraudulently inflating profits, overstating assets and suppressing liabilities over several years.

DETAILS OF THE FRAUD

Bank balances, interest income and debtors were overstated to the extent of Rs50.4bn, Rs3.76bn and Rs4.9bn respectively. Liabilities were understated by Rs12.3bn.

The adjusted book value works out to Rs18.4 per share against a reported book value of Rs124.3 per share and the pre-fraud revelation stock market price of Rs178.953 per share.

Impact on India’s IT (outsourcing) industry The Satyam scandal will undoubtedly mar India's reputation as a reliable provider of IT services to some extent. It is highly likely that other Indian outsourcing companies will be subject to greater degree of scrutiny by regulators, investors and customers. Impact on stock market News of what is possibly the country's biggest corporate fraud, sent the indices tumbling. Companies perceived to have poor corporate governance standards were most affected.

The Satyam scandal will undoubtedly mar India's reputation as a reliable provider of IT services to some extent.

It is highly likely that other Indian outsourcing companies will be subject to greater degree of scrutiny by regulators, investors and customers.

Impact on stock market

News of what is possibly the country's biggest corporate fraud, sent the indices tumbling.

Companies perceived to have poor corporate governance standards were most affected.

THE MAN WHO FORCED RAJU’S HAND JUST WHY DID CHAIRMAN RAMALINGA RAJU TAKE THE outrageous decision of emptying Satyam Computer Services' coffers into his family's pockets? Simon Joyce, the CEO of Lndon-based mobile payments technology firm Upaid, may be that compelling reason. Upaid and Satyam are battling each other on three legal fronts. Two suits, in which Satyam faces accusations of fraud, breach of contract and forgery, have been in Texas state and federal courts since 2007. Upaid is expected to file a 'damages report' that will enumerate the exact number in February 2009, even as Satyam is all set to go to trial in June next year. The outcome of the case may well establish some logic behind Raju's bizarre move.

Simon Joyce, the CEO of Lndon-based mobile payments technology firm

Upaid, may be that compelling reason.

F AILED A CQUISITION A TTEMPT

V CHANDRASEKARAN ( Pentamedia group ) DINESH DALMIA (DSQ Software) RAMALINGA RAJU ( Satyam Computers ) Byrraju Ramalinga Raju is the biggest fraudster in the Indian software industry. But he is not the first. Dinesh Dalmia, Vice-Chairman, DSQ Software, has been in jail for two years. Pentamedia company promoter V Chandrasekaran was found to be in cahoots with tainted broker Ketan Parekh in rigging up share prices.

SOFTWARE’S SHAME Besides the fraudsters, the software industry is littered with many, many companies that have failed or are on the verge of it.

GROWTH OVER MORALS Satyam-and one suspects many other companies-started chasing growth at the expense of morals. Books were cooked. Raju described it best in his confession to the board: "It was like riding a tiger, not knowing how to get off without being eaten.” Why software companies fail……. Entrepreneur-promoters in software services have failed to rise above self-interest and build sustainable businesses. “ Often such companies are limited to the vision of one person. It, therefore, becomes tough for them to retain top-grade managerial talent. That’s why a $200 million company often doesn’t get to $1 billion.” “ Their attitude is: if I make $10, I will put $7 in the business and $3 in my pocket.”

Satyam-and one suspects many other companies-started chasing growth at the expense of morals. Books were cooked. Raju described it best in his confession to the board: "It was like riding a tiger, not knowing how to get off without being eaten.”

Why software companies fail…….

Entrepreneur-promoters in software services have failed to rise above self-interest and build sustainable businesses.

“ Often such companies are limited to the vision of one person. It, therefore, becomes tough for them to retain top-grade managerial talent. That’s why a $200 million company often doesn’t get to $1 billion.”

“ Their attitude is: if I make $10, I will put $7 in the business and $3 in my pocket.”

Raju and the board mismanaged the $1.6 billion investment decision process, even though it was rolled back. Even if infrastructure was to be the next hot growth area for Satyam, how did it arrive at Maytas Properties and Maytas Infrastructure as the investment vehicle?

Raju and the board mismanaged the $1.6 billion investment decision process, even though it was rolled back.

Even if infrastructure was to be the next hot growth area for Satyam, how did it arrive at Maytas Properties and Maytas Infrastructure as the investment vehicle?

IS IT AN ACT OF CONSCIENCE OR IS Raju just securing his sons’ future? A person who has been an idol has let down most who idolized him. The most obvious of questions has still not been answered. Is it so easy to show Rs 5,000 crore of non-existent bank balances in balance sheets? Why did the disclosure come at this stage? Who benefits from them? These disclosures have a direct and material benefit to the family, including his sons who control Maytas and Rama Raju, Satyam's MD, among others.

A person who has been an idol has let down most who idolized him.

The most obvious of questions has still not been answered. Is it so easy to show Rs 5,000 crore of non-existent bank balances in balance sheets?

Why did the disclosure come at this stage?

Who benefits from them?

These disclosures have a direct and material benefit to the family, including his sons who control Maytas and Rama Raju, Satyam's MD, among others.

There are many other questions that need answers: Should we believe that the bank balances never existed? Independent director M. Rammohan Rao, the dean of ISB, chairs Satyam's audit committee. How can he feign ignorance and get "stunned by the disclosures"? Who valued the Maytas Properties' land bank? With the benefit of hindsight, isn't it true that the botched acquisition attempt of Maytas Infra would have benefited Satyam shareholders?

Should we believe that the bank balances never existed?

Independent director M. Rammohan Rao, the dean of ISB, chairs Satyam's audit committee. How can he feign ignorance and get "stunned by the disclosures"?

Who valued the Maytas Properties' land bank?

With the benefit of hindsight, isn't it true that the botched acquisition attempt of Maytas Infra would have benefited Satyam shareholders?

THE RUBBER STAMP CULTURE MUST BE ERASED Why Malpractices Happen: Audit firms now have 'limited liabilities’ as opposed to 'unlimited liabilities’. Financial statements and disclosures are not as credible as they used to be. Corporate crimes are still carried out at less severe level

THE RUBBER STAMP CULTURE MUST BE ERASED

Why Malpractices Happen:

Audit firms now have 'limited liabilities’ as opposed

to 'unlimited liabilities’.

Financial statements and disclosures are not as

credible as they used to be.

Corporate crimes are still carried out at less

severe level

THERE ARE MORE QUESTIONS than answers in the wake of Ramalinga Raju's shocking confession: Did Satyam really have the Rs 5,000 crore cash Reserve or did it not? Raju may prove to be a liar even in his guilt. Contrary to his claim that he inflated accounts and the cash reserve never existed, the government is investigating the possibility that the money was there and was siphoned off. And how much cash does Satyam urgently need? It has to pay creditors, including health insurance for overseas employees and, of course, it has to pay salaries. Just one month's salary for a company of Satyam's size would be $100-120 million. NOW WHAT

THERE ARE MORE QUESTIONS than answers in the wake of Ramalinga Raju's shocking confession:

Did Satyam really have the Rs 5,000 crore cash Reserve or did it not?

Raju may prove to be a liar even in his guilt. Contrary to his claim that he inflated accounts and the cash reserve never existed, the government is investigating the possibility that the money was there and was siphoned off.

And how much cash does Satyam urgently need?

It has to pay creditors, including health insurance for overseas employees and, of course, it has to pay salaries. Just one month's salary for a company of Satyam's size would be $100-120 million.

Will Satyam's customers stay or leave? On Jan 16, US-based State Fram Insurance, one of Satyam's 649 clients, terminated its contract, estimated at $50 million. Inside Satyam, heads of verticals are calling clients with offers to move to rival companies with their full teams. Will Satyam face more lawsuits? Apart from the billion-dollar Upaid lawsuit, Satyam potentially faces an avalanche of class-action lawsuits in the US. Almost a dozen US law firms have already filed class-action law suits in US courts on behalf of investors.

Will Satyam's customers stay or leave?

On Jan 16, US-based State Fram Insurance, one of Satyam's 649 clients, terminated its contract, estimated at $50 million. Inside Satyam, heads of verticals are calling clients with offers to move to rival companies with their full teams.

Will Satyam face more lawsuits?

Apart from the billion-dollar Upaid lawsuit, Satyam potentially faces an avalanche of class-action lawsuits in the US. Almost a dozen US law firms have already filed class-action law suits in US courts on behalf of investors.

Will there be large job losses? Yes. The logic is simple. Going by Satyam's headcount of 53,000 (which experts say would be harder to fudge given provident fund payments), Satyam's revenue per employee is comparable to peers. . For example, Satyam's revenue per employee for FY08 was about Rs. 16.5 lakh as compared to Infosys' Rs 18.3lakh and HCL Technologies' Rs 15.04lakh. What happens now to Price Waterhouse? If 'gross negligence' or 'connivance' is established by the ICAI panel, it could have greater consequences.

Will there be large job losses?

Yes.

The logic is simple. Going by Satyam's headcount of 53,000 (which experts say would be harder to fudge given provident fund payments), Satyam's revenue per employee is comparable to peers. . For example, Satyam's revenue per employee for FY08 was about Rs. 16.5 lakh as compared to Infosys' Rs 18.3lakh and HCL Technologies' Rs 15.04lakh.

What happens now to Price Waterhouse?

If 'gross negligence' or 'connivance' is established by the ICAI panel, it could have greater consequences.

Governance WHAT DOES IT TAKE TO TRULY INPROVE BOARD-LEVEL GOVERENCE IN INDIA? Democratize the board Independent Audit of Directors Take them to court Guidelines to punish non-performance will also help

Democratize the board

Independent Audit of Directors

Take them to court

Guidelines to punish non-performance will also help

Corruption hits as hard as terror, as the Satyam scam shows: If Mumbai 26/11 threatened the physical wellbeing of Indian citizens, the Satyam and scam threaten the economic well-being of Indians. Look closely and you will find the same trail of corruption behind both, with just one difference. In Transparency International's global ranking of corruption last year, India ranked 85th. In India, the combined wealth of the two Ambani brothers, for example, had crossed the hundred-billion-dollar mark. How come no financial journalist here investigates the source of such wealth?

If Mumbai 26/11 threatened the physical wellbeing of Indian citizens, the Satyam and scam threaten the economic well-being of Indians.

Look closely and you will find the same trail of corruption behind both, with just one difference.

In Transparency International's global ranking of corruption last year, India ranked 85th.

In India, the combined wealth of the two Ambani brothers, for example, had crossed the hundred-billion-dollar mark. How come no financial journalist here investigates the source of such wealth?

How come in these matters we fight shy of ideas of transparency and accountability? However, should not at least a minuscule section of the media be giving us some basic details? Does one have to be a Marxist to ask these questions? Is a governmental bailout plan for the rich and the greedy a "socialist" idea? In particular, the pink press, which is supposed to be reporting from the financial ringside, seemed to have little clue that even as it was salivating at and being complicit in the successes of the wealth- makers, it was but a sniffing distance away from a tsunami-size fraud.

How come in these matters we fight shy of ideas of transparency and accountability?

However, should not at least a minuscule section of the media be giving us some basic details?

Does one have to be a Marxist to ask these questions? Is a governmental bailout plan for the rich and the greedy a "socialist" idea?

Thank You Alias(s): ankurchaudhary3821@rediffmail.com, ankit.dudeja@yahoo.co.in, abhishekpj37sharma@yahoo.in, vaibhav.bbe@yahoo.com, karangaba6@gmail.com, vipindheer.lion662@gmail.com

Alias(s): ankurchaudhary3821@rediffmail.com, ankit.dudeja@yahoo.co.in, abhishekpj37sharma@yahoo.in, vaibhav.bbe@yahoo.com, karangaba6@gmail.com, vipindheer.lion662@gmail.com