the satyam scam 2009

1. THE SCAM
Presented By:
Taimoor Abdullah
Abubakar
Noor ul Ain Dania

2. THE BIGGEST CORPORATE FRAUD
• India’s biggest corporate fraud that shattered the dreams of thousands of investors- The satyam scam
biggest accounting fraud in modern India amounting to fourteen thousands crore(14,126cr.)
• Satyam once known as the “Kohinoor” of Indian IT industry having word-wide reach with 185 clients
from fortune-500 companies just left a question behind the whole fraud---

3. SATYAM COMPUTER SERVICES LTD.
• Satyam computer services ltd. Established in year 1987 by B. Ramalinga Raju. Ramalinga Raju started
Satyam with 10 engineers to provide IT solutions at industrial level. Satyam has been a pioneering force in
the global information technology. The company provides full range of IT services including software and
system management and development, engineering solutions, infrastructure management and
enterprise business solutions. Satyam also serves as BPO market in particular through majority held
subsidiary “Nipuna” providing bank office, product and tech. support, accounting and other related services.
It was operating on the global level with offices in 55 countries and more than 45,000 employees serving
nearly 500 companies, including 185 Fortune-500 Corporations. Offering both offsite and onsite
operations In 15 development centres in USA, UAE, UK, Hungary, China, Japan, Malaysia, Australia,
Canada and India. In 2006 the company posted record $1.09Billion revenue and $2Billions in the very
next year.

4. THE
WHOLE
KING-PIN OF
CORPORA
TE
FRAUD
• Founder and CEO of Satyam.
• Popular as Bill Gates of Andhra Pradesh.
• Comes from wealthy agriculture family based in
Hyderabad.
• Completed his MBA from Ohio University.
• Established Maytas infra ltd in year 1988.
• Raju once said in an interview that Satyam was founded
more as a hobby than anything else, but very quickly
realized the High potential in this area.
• Raju was also famous for his lavish lifestyle, in 90s
almost every newspaper was filled with articles about
his lavish lifestyle.

5. OTHER FACES INVOLVED IN SCAM
Brother of Ramalinga Raju
Managing Director
Chief Financial Officer
Independent Auditor
(Price Waterhouse)
B. Rama Raju
V
. Srinivas
S. Gopalakrishnan
Talluri Srinivas Independent Auditor
(Price Waterhouse)

6. MAYTAS, Y2K AND BOOM OF SATYAM
• In year 1988 Raju established Maytas infra ltd.
• Maytas reverse of Satyam.
• Sons of Ramalinga Raju become the directors of Maytas infra ltd.
• In 1990s a major IT system related problem called Y2K started flashing on each
and every newspaper, news channel and other media networks. At time of Y2K
problem Satyam got global recognition as large MNCs approached Satyam for
their IT solutions.
• The share prices of satyam surged due to unimaginable increase in profits due to
Y2K

7. MANIPULATED FIGURES
Particulars Actual Figures
(In crores)
Reported Figures
(In crores)
Differences
Cash & Cash
Equivalent
321 5361 5040
Accrued Interest on
FDs
NIL 376.5 376
Understated Liability 1230 NIL 1230
Overstated Debtors 2161 2651 490
Revenues 2112 2700 588
Operating Profits 61 649 588

8. FALSIFICATION
• 13,000 Fake employees
• 376 Fake Companies
• 21% Fake increase in profits
• Dummy Directors
• 6,000 Hectare land

9. FAILURE OF MANAGEMENT INFORMATION SYSTEM

10. HYDERABAD METRO ROUTE
• When Raju get to know about the Hyderabad Metro route, started purchasing
land around route.

11. SUB PRIME CRISIS
• The subprime meltdown was the sharp increase in high-risk mortgages that went
into default beginning in 2007, contributing to the most severe recession in
decades. The housing boom of the mid-2000s—combined with low-interest rates
at the time—prompted many lenders to offer home loans to individuals with poor
credit. When the real estate bubble burst, many borrowers were unable to make
payments on their subprime mortgages.

12. PLAN-B
• As the last resort of Ramalinga Raju demolished, he did his last attempt to save
himself-
• B. Ramalinga Raju purposed to merge Maytas Infra Ltd. In Satyam Computer
Services Ltd. But investors of Satyam denied this deal.

13. REVEALED
• DSP Merrill Lynch an investment banker of Satyam during its process of due
diligence come to know that there is happening something not right with its
financial statements. Before the meeting of DSP Merrill Lynch and SEBI Ramalinga
Raju Confessed.

14. THE CONFESSION
• On January7, 2009 B. Ramalinga Raju wrote latter to SEBI about the whole scam and
confessed his crime. In his confession letter Raju wrote :-- It was like riding a tiger, Not
knowinghowto get offwithout being eaten.

15. ANTI SCAM DEPARTMENT: AUDIT
• Here in the whole scam role of auditors was questionable, auditors are under the
obligation to verify the Trueness and Fairness of financial statements but, what
auditors have done here the exact opposite of what they were supposed to do. Auditors
Joined hands with Ramalinga Raju and become the partner in the scam no matter weather
they were internal auditors or independent.

16. IMPACTS OF WHOLE SCANDAL

17. WHAT HAPPENED TO THE SATYAM POST SCAM
• Government appointed new BOD and set the target to sell Satyam within 100
Days.
• 46% stake in Satyam Computer Services ltd. purchased by Tech Mahindra in
public auction.

18. PENALTIESAND CHARGES
• Ramalinga Raju and nine others were sentenced to Seven year jail and 5.5 crore
fine on each but Ramalinga Raju fined with 1,849 crore.
• SEBI banned Raju from capital market for 14 years.
• Independent Auditors, S. Gopalakrishnan and Talluri Srinivas charged with fine of
5,00,000 each and they were disqualified for being act as auditor in future.
• Actions were also taken against Auditing Firm “Price Waterhouse Cooper”. Firm
was barred to do its business in India for next two years.

19. THE CONCLUSION
• When the scam unearthed governing authorities come in action. Various task forces
established by government to suggest reforms and better implementation of Corporate
Governance. SEBI made substantial changes in its regulations and companies act repealed
by new CompaniesAct 2013. Guidance notes issued by ICAI for reporting of Frauds.
• This whole fraud could have been avoided if-
Auditors were Honest.
Investors have analyzed company properly.
Proper Corporate Governance would be there.