(A)Satyam SAGA

Gaurav Nemade, CSEIIT Roorkee

Presented By:The sto

ry of B

IGGEST Corporate fraud of

India

The rise of Satyam

Revelation by Raju

How did the fraud start?

Probable reasons

The Illusionists

Maytas Acquisiton

Why did Raju confess?

Investigation

CONTENTS

THE RISE OF SATYAM

THE RISE OF SATYAM

•1987: Satyam Computers Pvt Ltd BORN.•1991: - June: First Fortune 500 clients. - August: Converted into Public Ltd Co .•1994: THE BIG BREAK-Allies with Dun and Bradstreet Corp.•2000: - Declared one of the 100 most Pioneering Technolgy Companies by World Economic Forum - Dataquest IT Man of the Year Award•2002 - CNBC's Asian Business Leader - Corporate Citizen of the Year Award

DISASTER

THE DISASTROUS REVELATION

The Black day: 7th January, 2009

Accounting fraud of over 7800 crore rupees

From past 7 years accounting books were cooked:

-Profits were inflated-Understated liability and overstated debts-Accrued interests-The gaps in the balance sheets are due to

the Inflated profits

CONFESSION LETTERRaju wrote in the confession letter “Every attempt to fill the gap failed".

It was like riding a tiger, not knowing how to get off without being eaten”.

CONFESSION LETTER

Top officials were unawareOnly MD & CFO were others.

No personal profits.Did not sell any shares from 8 years.

MINUTES AFTER REVELATION

• 11464 CroreCompanies

worth

• BSE sensex fell by 749.05 i.e. 7.25% .• NSE fell by 192.40 points i.e. 6.18%.

Stock Market

• Biggest single day fall for a stock in stock market

• 175 Rs/-(Jan 6th)

Satyam shares 1607 Crore

77%

All time low of Rs 11.50 on 9th jan and closed at 23.75 Rs/-.Compared to highest of 524.90 Rs/- on may 29,2008

Search Volume Index

HOW DID IT START???

CFO revealed during investigation: Started 6-7 years ago 10 crore was inflated to 200 crore in Balance Sheet This marginal gap went on expanding over years.

7800 Crore

Fraud

years

Ramalinga Raju

B. RamaRaju

T Sriniv

as

S. Gopalkrishna

n

V. Sriniv

as ILLUSIONISTS

THE ILLUSIONISTS

•Ramalinga Raju: Satyam Former Chairman•B Rama Raju: Brother of Ramalinga Raju Former Managing director .•V Srinivas: Ex-chief financial officer •S Gopalakrishnan: PriceWaterhouse Auditor•Talluri Srinivas: PriceWaterhouse Auditor

Functions: Finance & accounting, internal audit, tax compliance, logistics & human resources.

PROBABLE REASONSPRESSURE TO

MEET EXPECTATION

• Growing competition• Threat of being overtaken

OVERCONFIDENDCE

• On his ability

PERSONAL BENIFITS

•Siphoning off funds•Salary of non-existent 13000 employees

"Since about seven years we wanted to show more income in the accounts to avoid others from involving in the company affairs and any possible hostile acquisition”.

THE GAME PLAN

The software firm’s unreal and fictitious fixed deposits were managed with an understanding between the management and audit section . 

•Ignorence of Firm’s Auditors.

AUDIT SECTION MANAGEMENT

•Control over CFO.•Offered to resign twice.

•Bank deposits were directly handled by the chairman and Managing director.

THE LAST ATTEMPT

The MAYTAS Acquisition• Maytas infra and Maytas properties :

firms owned by the sons of Raju.• Planned to buy the Maytas to fill the gap

in the balance sheet.• Last attempt Raju made to fill the gap in

the balance sheet.• Major shareholder rebellion• Acquisition was termed “Poor corporate

governance”.

WHY DID RAJU CONFESS?

?? ?

.”

A person who used a pseudonym, claimed himself to be a former senior executive in Satyam involved with its contract with the World Bank, acted as the whistleblower whose email to a Satyam board member triggered a chain of events that culminated in erstwhile chairman Mr Raju’s decision to confess to the financial crime.

SATYAM UNDER RECONSTRUCTION•Appointing new board.

•Board appointed by Govt: Former Nasscom Chief - Kiran Karnik, Chairman HDFC -Deepak Parikh Former SEBI member- C. Achuthan.

•Satyam shares gained over 44% day after appointment of the new board.

•New CEO: A S Murthy•Tech Mahindra acquired Satyam on April 13, 2009

RAJU & OTHERS UNDER PROBE

CBI filed a charge sheet against nine on April 7, 2009.

• -Raju’s second brother S. Raju• -2 employees from finance wing• -vice president(Finance)

Apart from 5 illusionists, 4 others are:

CBI investigating further

THE FULL TRUTH, IT APPEARS, IS NOT

YET OUT.

References

•Economic times•Wikipedia•www.economictimes.indiatimes.com•www.satyam.com/  •www.business-standard.com•www.satyamscam.in•www.moneycontrol.com•www.business.outlookindia.com•www.equitymaster.com•www.expressindia.com

ANY QUESTIONS ??