The Satyam Saga: Updates

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Acting on speculations that former Satyam CEO B. Ramalinga Raju might have siphoned off huge amounts of cash, the government directed the Serious Fraud Investigation Office to probe Maytas Properties and Maytas Infrastructure. Prem Chand Gupta, the Minister for Corporate Affairs, told the media that the investigators have reason to believe that there was a nexus between Satyam and the Maytas companies, owned by Raju’s sons.

Course of the investigation

In what could be the possible motive for the seven year long scam, investigators will look at records of all the three companies to see whether Raju might have diverted funds for the development of what is primarily his family business. The SFIO has also stumbled across information on other ways the promoter of the company could have diverted funds with. Reports have emerged that the Investigation office is looking at employee counts and acquisition claims which, if falsified, could have acted as pockets where funds could have been diverted into in the name of salaries and buyout costs.

Political aspects

Giving a political angle to the scam is the controversy surrounding the role of Y S Rajeshekhar Reddy. The Andhra Pradesh chief minister Y S R Reddy, who recently denied providing any help to the disgraced Satyam CEO or to his sons running the Maytas companies, is in a fix after a Government Order (GO) revealed that he personally instructed 50 acres of land to be allotted to Satyam Computers in Vishakhapatnam to develop an IT SEZ. In spite of the CM claiming that the land allotment to Satyam was on the basis of their competent bidding, the GO clearly reveals that Satyam got a deal that favoured them to an unfair extent. The lands were given to Satyam at such reduced rates that it cost the state exchequer a loss of at least Rs. 195 crore. Although the government cancelled the allotted land as soon as the scam surfaced, the fact remains that it had been partisan towards Satyam on the instructions of the CM.

Disappearing clients

As was expected shortly after the scam was exposed, clients of the tainted software firm have started considering other options rather than waiting for Satyam’s revival. Reports of proactive wooing of clients has already been doing the rounds in the past few days while companies like Tata Consultancy Services (TCS), who have denied approaching Satyam clients, have claimed to have been approached by companies who relied on Satyam for outsourcing.

Uncertain Future

Analysts are careful enough to not make any guesses about the company’s future at this juncture. With clients leaving, employees applying for new jobs and inevitable international lawsuits mounting on the name of Satyam, it is hard to identify any corporate buyer who would want to step in and save the brand.

Satyam employees, especially senior ones and specialists, have some reason to feel elated, though as reports have emerged that rival companies are very much interested in hiring them and utilising the knowledge they hold. 500 of the 900 employees who were working on behalf of the outsourcer at US-based State Farms Insurance Company’s projects will be adjusted by Satyam, on account of their valuable experience and skills, in other areas of the company’s operations. The remaining 400 employees, who were stationed at the client’s Illinois site, have the option of resigning and taking up new jobs. Among them, 180 employees have Satyam sponsored H1B visas while the remaining has L1 visas. Should the H1B visas holders were to resign and take up any other US based job, they will need an approval from Satyam.