Satyam irregularities: Past and Present

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The incessant after-effects of the Rs 7000 crore Satyam scam are busy shaking roots of corporate regulation system in India. 14 days have passed since B Ramalinga Raju, former chairman, Satyam, accepted the fraud but the future of the company and its associates still remains in the dark. All this and more needs to be recapitulated and analysed to determine what shortcomings of the government machinery led to such a magnanimous corporate fraud in the country.

It is essential to note that as many as six allegations had already been made on the functioning of Satyam long before the fraud came into light on January 7 this year.

C Anantanarayanan, a former columnist for Deccan Chronicles, had raised questions about the company’s balance sheets way back in 2001. According to him, Satyam had mentioned false turnover and profits in its audited accounts for the year ended March 2001. After Anatanarayanan’s accusations, several others corresponded with the government to express their concern about the transparency of Satyam’s functioning.� The company’s charity controlled by founder Ramalinga Raju and its accounts were questioned five times by five different people since 2007 but the issue got no response from monetary regulatory bodies. The allegations were:

April 2007 – C Ramachandriah, Associate Professor, Centre for Economic and Social Studies, started a campaign raising concern over the process of awarding of the Hyderabad Metro Rail Project to Maytas Infra.

September 11, 2008 – E Sreedharan, Managing Director, Delhi Metro Rail Corporation, in his letter to the Planning Commission chairman Montek Singh Ahluwalia mentioned that Satyam was being favoured by Andhra Pradesh government and that it could lead to a “big political scandal some time later”.

October 17, 2008 – Kawaljeet Saluja, Associate Director, Kotak Securities, questioned Srinivas Vadlamani, former CFO, Satyam, about the cash management policies of the company.

October 24, 2008 – Shaffi Mather, Spokesperson, Transparency for Contracts, an NGO, filed a Public Interest Litigation (PIL) against Satyam-run Emergency Management & Research Institute saying that public money was being misused and Satyam’s policies lacked transparency.��

December 15, 2008 – EAS Sarma, Former Secretary, Department of economic affairs, wrote to the Andhra Pradesh government about the improper allotment of land to Satyam. Sarma’s allegations were acknowledged only after the fraud was exposed on January 7, 2009.

All of the above accusations lead us to one major question. Why were regulatory bodies not able to prevent the scam in spite of repeated allegations made over Satyam’s functioning? Early warning systems seem to have lacked transparency in their policies. SEBI and other bodies were not able to pick up signals of a possible scam and a single man managed a Rs 7000 crore fraud, biggest in the country’s history.

Now that the fraud is exposed and authorities are investigating Satyam’s accounts, there are strong possibilities of a buyout for the company struggling for its existence. Tarun Das, Board Member, Satyam, said that the company had been approached by other domestic and foreign companies for takeover. Although Mr. Das didn’t reveal the names of prospective buyers, Larsen and Toubro (L&T) and Aegis BPO are believed to have approached Satyam with partial or complete buyout offers.