satyam computers scam ppts

1. SATYAM
COMPUTER
FRUAD

2.  Satyam computer was founded in 1987.
 Hyderabad , India
 The word satyam comes from sanskrits
means the truth and reality
 1992: Indian stock exchange
 1995:Established the subsidiary in the
USA
 1999; First Indian IT company listed on
the (NASDAQ) Stock exchange.

3.  IN early 2000s,satyam experienced
significant growth and achieved
numerous milestone.
 First Indian IT company Listed (NYSE)
IN 2001.
 RR ,confessed to massive financial fraud
and admitted to inflating the company
revenue and profits for several year.
 The scandal led to a significant loss of
investor of confidence.

4.  One of top five IT Companies.
 Focused on the enterprise
segment.
 Extensive client list including 185
fortune 500 companies
 Services list national stock
exchange, pink sheet, and
Bombay stock exchange
 Fake number of employees shown
in figure.
 Clear violation of the prevailing
laws in India.

5.  2008, satyam was involve in major
corporate scandal .
 2009, Acquired be tech Mahindra
 2011, PwC Is banned from auditing
Indian companies for two year.
 2013, rebranding as Mahindra
Satyam.

6. MISSION : To provide our customer with the best possible IT solution
and services.
 Delivering high quality IT services.
 Building long term relationship with our customers.
 Being a responsible corporate citizens.
VISION: To be a global leader in information technology(IT)solution
and services, provide our customer that help them to achieve their
goals.
TAG LINE : Play the games, transform the business,

7.  The company began with 20
employees.
 Operation in 65 countries across
world.
EMPLOYEES: (52000) 2008
REVENUE : 2$ BILLION

8.  NASSCOM Award for Excellence In
corporate Governance(2004).
 Forbes Global 2000 List of the world largest
companies.
 UN Global Compact award
 World Economics Awards in Networks.
 Peacock Award

9.  To save the company ,Indian
government appointed a new board of
directors and initated a process to find a
buyer for satyam.
 2013, Mahindra satyam merged to form
a new entity called tech Mahindra
limited.
 The merge aimed to leverage synergies
and create a stronger presence in the
global IT services market.

10.  RAMALINGA RAJU(CEO)
 RAMA RAJU(MANAGING DIRECTOR )
 SRINIVAS VADLAMANI(CFO)
 GOPALAKRISHNAN(INTERNAL AUDIT)

11.  Ramalinga Raju:
24% share
 Rama Raju:
12 %
 Satyam employee welfare trust:
18% share
 Public share holder:
46% share

12.  B. Ramalinga Raju
 Krishna palepu
 Vadlamani Venkata
 V.S Pravahkar

13.  Mangalan Srinivasan
 Vinod k Dham
 U.S Raju
 M rammohan Rao
 T.R Parasad

14. Independent director
Lack of expertise
Board structure
Inadequate internal controls

15.  One criticism of the board during the Satyam fraud was the lack of
relevant expertise and industry knowledge.
 Several board members had limited experience in the IT sector.
 which may have hindered their ability to effectively scrutinize the
company's financial statements and question irregularities

16.  The structure of the board at Satyam Computer Services followed
a traditional model.
 the chairman holding significant power and influence.
 This concentration of power in the hands of Ramalinga Raju
contributed to a lack of checks and balances and the ability to
manipulate financial records without proper oversight.

17.  The board, along with
senior management, failed
to establish robust internal
controls.
 Risk management
mechanisms that could
have prevented or detected
the fraud earlier.
 This lack of proper controls
created an environment
conducive to fraudulent
activities.

18. • Satyam Computer Services Ltd., an Indian IT services company, was founded in
1987 by Ramalinga Raju.
• Satyam emerged as one of India's top IT companies, providing software
development, business process outsourcing, and other IT services.
• In January 2009, Ramalinga Raju, the chairman of Satyam, confessed to a
massive accounting fraud in a letter to the company's board.
 The fraud involved inflating the company's financial statements by fabricating
revenues, inflating cash balances, and understating liabilities

19.  Satyam's financial statements were
manipulated to show inflated
profits, assets, and revenues,
deceiving investors, stakeholders,
and regulatory authorities.
 The actual financial position of the
company was significantly weaker
than what was reported.
 The fraud amounted to
approximately $1.47 billion (7000
CR), making it one of the largest
corporate scandals in India's
history.
 Ramalinga Raju and several other
key executives were arrested, and
investigations were launched by
various regulatory bodies.

20.  Satyam faced severe financial
distress and was eventually acquired
by Tech Mahindra, a subsidiary of the
Mahindra Group, to salvage the
company's operations.
 The Satyam fraud exposed significant
weaknesses in corporate governance,
auditing practices, and regulatory
oversight in India's corporate sector.

21.  Satyam scam was the biggest
corporate in India.
 Raju Ramalinga made 7500
fake invoices of un existed
things and also made fake
bank statements.
 On NYSE the stocks down to 55%
in 2008.

22.  Raju attract customers by showing that fake
growth.
 Due to this share price start increasing and
promoters continuously sold shares on high prices
 1999, promoters shareholding in satyam was 24%
and it dropped to 2% by end of 2008
 He sold these shares to buy more properties
 The gap between actual figures and fake keep
increasing, that was big amount

23.  In 2003, Valuation of
Satyam Computer is 1
Billion Dollars.
 In 2008, company valued
over 2 Billion Dollars.
 Stocks Prices Increased by
300%
 Highest recorded stock price
for Satyam was on January
9, 2008 around INR 544.75.

24. Financial Statement For Year 2008-2009
ACTUAL INFLATED
REVENUE 2112 2700
PROFIT 61 649
CASH BALANCE 321 5361
A/C INTEREST NIL 376.5
LIABILITES 1230 0
DEBTORS 2161 2651

25. B Rama Raju
(Managing Director)
Ramalinga Raju
(Satyam Founder and
Chairman)
Valdamani Shrinivas
Ex-Chief Financial Officer

26. Mr. VSP Gupta
Internal Auditor
S Gopala Krishnan
External Auditor PWC
Srinivas Talluri
From Talluri

27.  Satyam's stock price plummeted about 75% within a day of
the confession. Investors panicked and rushed to sell their
shares, causing a significant drop in the overall market.
 Satyam fraud caused significant investor losses;
institutional and mutual funds affected.
 Resignations and arrests.

28. The Satyam fraud involved various
violations of corporate governance codes
and principles.
 Violation of Board Independence:
Personal and professional relationships
compromised the independence of the
board of directors at Satyam.
 Lack of Transparency and Disclosure:
Satyam manipulated financial
statements and withheld crucial
information, failing to provide
transparent financial information.

29.  Breach of Accountability and Responsibility: The
board and senior management at Satyam failed in
their fiduciary duties and responsibilities,
neglecting their accountability to stakeholders.
 Ineffective Audit Committee: The audit committee
was unable to detect accounting irregularities and
fraudulent activities, highlighting its lack of
effectiveness in overseeing financial reporting.
These violations lead to one of the largest corporate
frauds in India's history.

30. Operating performance of Satyam

31.  Employees faced non‐payment of salaries, project cancellations, layoffs and
equally bleak prospects of outside employment
 Cisco, Telstra and World Bank cancelled contracts with Satyam
 Shareholders lost their valuable investments
 Bankers were concerned about recovery of financial and nonfinancial exposure
 Indian Government was worried about its image of the Nation & IT Sector
affecting faith to invest or to do business in the country

32.  Biggest fraud in the history of India
(7800crore)
 Scam continue for 8 years
 company bound to buy land of
58000acra
 Actual employees 40000 but shown
53000
 7Jan 2009 Ramalinga Raju claim that
company manipulate the financial
statement
 Satyam means truth

33.  PWC auditors were involved
 2013 report that CEO were involved in
money laundry
 14162crore investment were lost
 LIC investment include 950crore
 ERP system that automated financial
system
 12-15 employees manipulate data at of
working
 H-data/S-data
 2013 merge tech Mahindra

34. Charged 5.5 crore fined to Raju's and brother in law
After confessing price fell from 170 to 6.50 in few days
CFO executives sold share before share confessing

35.  Indian metro E Sridharan
 Alerted then planning
commission
deputy Montek Singh
Aluwailia
 B Ramalinga Raju seven years
of rigorous imprisonment

36.  12 April 1992 SEBI was established
 Protect the interest of investors in securities
and promote development
 According to SEBI, PWC showed total
disregard of stipulated during practices which
indicated the complicity in manipulation
 PWC were internationally reputed firm and
public has no reason to believe that audit
report was false, SEBI whole time member G
Mahalingam said
 Satyam CEO paid 2-3 times more money

37.  SEBI banned 14 years to trade in security market
 Satyam's proprietors, B Ramalinga Raju and his brother B Rama Raju,
were detained by state police in Andhra Pradesh, and the firm was
taken over by the Central Government
 In April 2009, 46% stake in Satyam was purchased by ‘Tech Mahindra’
and both the companies legally merged in June 2013

38.  Satyam had agreed to acquire 100% stake in
Hyderabad-based Maytas Properties for
$1.3 billion and a 51% in public listed firm
Maytas Infra for $300 million. The total deal
value was $1.6 billion (Rs 8,000 crore). The
deal would have wiped out all the surplus
cash on the books of Satyam, which is
estimated to be $1.2 billion. The deal would
have required Satyam to take up debt for
the acquisition and also assume the debt of
the two companies.

39.  On 9 January 2009, the CLB suspended the Current directors of Satyam
and allowed the Government to appoint up to 10 new nominee directors
 Companies Act, 2013 incorporated new provisions:
 Disclosure of Promoter’s Holding
 Rotation Of Auditors
 Limited or other prescribed companies must not appoint or re-appoint- 1.
An individual auditor for more than one term of five years.
2. An Audit firm of two terms of five consecutive years.
3. The Joint Auditors in the manner they do not complete their term in
the same year

40.  1) Small holding of promoters. The initial low share of 8% reduced to
5% which further dropped till 3.8%
2) Failure of Board of Director- Satyam's BOD never questioned
Raju on murky group investments.
Though there were six non-executive directors on the BOD, they
failed to check Raju's misdeed
3) Failure of Audit Committee
4) Non Disclosure of the pledging of promoters share
5) Flaws in External Audit

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