SATYAM SCAM

PROJECT REPORT A STUDY ON THE SATYAM SCAMReport submitted in partial fulfillment of the requirement for the award of the degree of

BACHELOR OF COMMERCE (HONOURS) OF ST.XAVIERS COLLEGE,- KOLKATA (AUTONOMOUS) Submitted by VARUN MUSADDI ROLL NO. 334 ROOM NO. 12 Under Guidance of SREE PRAKASH, PROFESSOR-ACCOUNTING AND FINANCE GROUP, DEPARTMENT OFCOMMERCE (MORNING) MARCH - 2012

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SATYAM SCAM

ACKNOWLEDGEMENT

I take this opportunity to express my deep sense of gratitude to all those who have contributed significantly by sharing their knowledge and experience in the completion of this project.

My heartfelt thanks to our respected Faculty Guide namely Prof. S. PRAKASH Without his continuous help the project would not have been materialized in the present form. His valuable suggestions helped me at every step. Finally, I would also like to thank all my dear friends for their kind cooperation, advice and encouragement during the long and arduous task of preparing this project and carrying out the project.

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SATYAM SCAM

DECLARATION

I hereby declare that the project report titled The Satyam Scam and the Steps taken thereafter is my own work and has been carried out under the guidance of Prof. S. PRAKASH, Faculty, ST. XAVIERS COLLEGE, KOLKATA. All care has been taken to keep this report error free and I sincerely regret for any unintended discrepancies that might have crept into this project. I shall be highly obliged if errors (if any) be brought to my attention.

Thanking You.

( VARUN MUSADDI )

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Sl. No. INDEX 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. Introduction Objective of Study Abstract Research Methodology Company Analysis Vision and Mission History Products Offered Details of Scam` Impact of Satyam Scam on its Shares Why did Raju committed the fraud? What was the Auditors Responsibility? Steps taken by Regulatory Authorities Steps taken by Law Enforcing Authorities Steps taken by PwC Satyam after Satyam Scam Satyam Scam and Corporate Governance How do Analyst view Tech-Mahindra Merger How to avoid such scams. Learnings & Refrences

Page No 5 7 8 9 10 11 12 15 16 21 22 25 27 30 31 33 34 37 40 42

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INTRODUCTIONTHE SATYAM SCAM (RAJU NOT THE GENTLEMAN)Indias Enron, the biggest corporate fraud of Indian History

SCAM: A scam is a dishonest attempt to trap US into parting with our money. Unfortunately, we have all experienced being cheated in one way or another, and we all know how it feels.

A 'scammer' may make a personal approach, with an offer too good to be true. Someone may email us, phone, text-message or post an offer that they press us to take up. Known scams cover a vast range of business transactions, including pyramid selling/multi-level marketing; investment opportunities; prize/special offers; home working schemes; miracle cures and bogus charities. Although the actual message may differ, the intention is always the same; to obtain money from the consumer, either by an outright swindle or by selling goods and offering services which are not commensurate with the price charged. Scams-fraudulent business schemes-are not a new phenomenon. With the ever-growing availability of mass communication methods, scams have the potential to target many more consumers with increasingly serious results.

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SATYAM SCAM

Satyam ScamSATYAM means truth in Sanskrit. On January 7, 2009 in a letter addressed to the existing Board of Directors of the Satyam Computer Services Ltd. and copied to the Chairman of SEBI and Stock Exchanges, Raju admitted that the Companys Balance Sheet as at September 30, 2008 carried inflated cash and bank balances, nonexistent accrued interest, an understated liability and overstated debtors position. The companys founder and chairman, B. Ramalinga Raju, confessed to a $1.47 billion fraud on its balance sheet, which he and his brother, Satyams managing director, had disguised from the companys board, senior managers and auditors for several years. It was like riding a tiger, not knowing how to get off without being eaten, Mr Raju wrote. The scam at Satyam Computer Services, the fourth largest company in Indias much showcased and fiscally pampered information technology (IT) industry, has had an unusual trajectory. It began with a successful effort on the part of investors to thwart an attempt by the minorityshareholding promoters to use the firms cash reserves to buy out two companies owned by them Maytas Properties and Maytas Infra. That aborted attempt at expansion precipitated a collapse in the price of the companys stock and a shocking confession of financial manipulation and fraud from its chairman, B. Ramalinga Raju. The Satyam scam is also referred to as 'India's Enron' for its similarities to the scandal at the US energy giant.

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OBJECTIVE OF STUDY

Objectives tell us why project has been taken under study. It helps us to know more about the topic that is being undertaken and helps us to explore future prospects of that organization. Basically it tells us what all have been studied while making the project.

Objective of study

To analyse the history of Satyam. To analyse why the scam was not caught earlier. To know the reasons of why Raju indulged himself in fraud. How to prevent such scams.

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ABSTRACT

Ramalinga Raju and his brother Rama Raju, accused of committing a Rs40 billion fraud that threaten to shake the very foundation of Satyam Computers, are in jail. The three-member director board constituted by the Government has got down to brass tacks. The Government has further offered financial support to bail out the beleaguered Satyam. The 50,000 odd employees of Satyam find themselves at sea, with some IT majors deciding against hiring displaced Satyam staff. There are fears over the adverse fallouts of the Satyam fraud on the international reputation of the exports-driven Indian IT industry. The picture is getting curiouser and curiouser by the day.

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RESEARCH METHODOLOGYMethod of data collection:-

Secondary sources:-

The data for study has been collected from various sources: Internet Sources Journals Books.

Data has also been collected from Internet and particularly the companies own website and its annual report.

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COMPANY ANALYSIS COMPANY PROFILE:The company primarily operates in the US. The company is headquartered in Secunderabad, India and employs about 51,000 people. Satyam was the fourth largest IT Company in India. Satyam's network spans 57 countries, across 6 continents. Nearly 51,000 dedicated and highly skilled IT professionals, worked in development centers in India, the USA, the UK, the UAE, Canada, Hungary, Singapore, Malaysia, China, Japan and Australia and served over 570 global companies, including over 165 Fortune 500 corporations. Satyam Computer Services Ltd. (NYSE: "SAY") was a leading global consulting and IT services company, offering a wide array of solutions customized for a range of key verticals and horizontals. From strategy consulting right through to implementing IT solutions for customers, Satyam straddles the entire IT space. It had excellent domain competencies in verticals such as Automotive, Banking & Financial Service, Insurance & Healthcare, Manufacturing, Telecom-Infrastructure-Media-EntertainmentSemiconductors (TIMES). As a diverse end-to-end IT solutions provider, Satyam offered a range of expertise aimed at helping customers re-engineer and re-invent their businesses to compete successfully in an ever-changing marketplace. We have strategic technology and marketing alliances with over 90* top-notch companies that help us provide end-to-end services to our customers.Satyam's need-driven deployment of domain and technology expertise brings to customers a range of solutions and products that enhance performance and competitiveness. Its unique RightSourcingTM delivery model allowed them to leverage local competencies to offer global competitiveness to our customers. Its consulting and IT solutions had resulted in technology-intensive transformations that have met the most stringent of international quality standards. Satyam had developed a unique quality hallmark, called eSCMSM (eSourcing Capability Model), for IT Enabled Services (ITES), in collaboration with Carnegie Mellon University and Accenture. Satyams equity shares are listed in India on Bombay stock Exchange (BSE) and the National Stock Exchange of India Limited (NSE) and its American Depository Recipts (ADRs) are listed on the New York Stock Exchange (NYSE).10

SATYAM SCAM

VISION OF SATYAM COMPUTER SERVICES LIMITED:

The vision of Satyam Computer Services Limited was 'What Business Demands'!

Over the last few years before the scam, Satyam Computer Services Limited took rapid strides in developing new businesses in line with its proposition to offer complete technological services to both corporate and retail clients. The vision was to develop Satyam Computer Services Limited into an organization that is empowered by bright and talented individuals, working in teams and delivering world class technology.

MISSION OF SATYAM COMPUTER SERVICES LIMITED:

To produce world class engineers and scientists at the Under Graduate, Post Graduate and Doctoral levels in various branches of Engineering, Science and Technology with a view to meet quality manpower requirements for the benefit of mankind and sustainable development of the nation.

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HISTORY OF SATYAM COMPUTER SERVICES LIMITEDSatyam Computer Services Limited was incorporated as a Private Limited Co. in 24 th June, 1987 for providing Software Development & Consultancy Services to large corporations. The Company was promoted by B Rama Raju and B Ramalinga Raju. The Company has set up two software Technology Parks, one at Mayfair Centre, Secunderabad & other at Qutuballapur of Ranga Reddy Dist. of Andhra Pradesh. The Company has also developed a Software Development center in Bangalore. The Company became a 100% EOU under the STP scheme of Dpt. of Electronics Government of India & exports software to USA, Canada, Sweden & Germany etc. On 26th August, 1987 it was converted into a Public Limited Company. In June 1991, Satyam Computer Services limited became the First Fortune 500 client. On 26th August 1991 it was converted into a Public Limited Company. In 1992, the company went in for a Public Issue of Equity shares and the IPO was oversubscribed by 17 times. Satyam went in for a public issue of equity shares with the main objective of setting up a software technology park & a 100 percent export oriented unit for software development with a dedicated 64 KBPS satellite link. In December 1995, Satyam Infoway (Sify), subsidiary of Satyam Computer Services Ltd., was incorporated. In 1996, two offices were set up, one in USA & other in Japan. And the Comp. has added new business partners in Australia, Canada, Japan & Europe. During the year Comp. promoted 4 subsidiaries. Viz Satyam Renaissance Consulting Ltd., Satyam Enterprise Solutions Pvt. Ltd., Satyam Infoway Pvt. Ltd & Satyam Infoway Pvt. Ltd. In the year 1997, the co. added additional space in Secunderabad & Bangalore and new software development centers were opened in Hyderabad, Pune, Chennai & Bhubaneswar during the year, the Comp. established a school at Indian Institute of Information Technology at Hyderabad, joining a select band of global corporations like IBM, Microsoft and oracle who are also participating in IIIT activities. Satyam Infoway [Ps] limited [SILs], a subsidiary of Satyam12

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Computers, signed an agreement with Sterling Commerce, International Group of U.S. to provide electronic data interchange [EDIs] & other value added electronic commerce solutions throughout India. Two new offices were set up in the US, and another in Japan and new business partners have been added in Australia, Canada, Japan & Europe. In the same year, Satyam Computer Services Ltd., was been selected by the Switzerland-based World Economic Forum & World Link magazine as one of India most remarkable & rapidly growing entrepreneurial companies.

In 1998, Satyam Infoway, a wholly-owned subsidiary of Satyam Computer Services Ltd. received the Technical Engineering Centre [TECs] approval from the Department of Telecommunications [DoTs] for commercialising its operations. Satyam Infoway, a whollyowned subsidiary of Satyam Computer Services Ltd. received the Technical Engineering Centre [TECs] approval from the Department of Telecommunications [DoTs] for commercialising its operations in the same year. In 1999, Satyam Infoway Ltd became the second largest Internet services provider in India based on the number of customers. Satyam Computer Services Ltd announced that it had divested its 24 per cent ownership of Dun and Bradstreet Satyam Software Pvt Ltd [DBSSs] in favour of Cognizant Software Solutions Corporation, a subsidiary of Cognizant Corporation, US. In 1999, Satyam Infoway became first Indian IT Company to be listed in NASDAQ. Satyam Computer Services Ltd., one of fastest growing IT companies in the country, took significant decisions including the merger of three of its subsidiaries with the parent Comp. & a 1:1 bonus issue. In 2000, the co. was been named a 2000 Web Business 50/50 award winner for SatyamWorld its corporate intranet, to become the only Comp. to feature in this list. The co. also received the National HRD award - 2000 for outstanding contributions to HRD.

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In 2001, the Comp. was been rated as one of 10 most well-regarded companies in the country in prestigious 2000/2001 Review 2000 Survey conducted by Hong Kong-based Far Eastern Economic Review. The co. won the Frost and Sullivan market engineering award for Competitive Strategy 2001 in the application service provider category. - The American depositary shares [ADSs] of Satyam Computer Services on May 16 was listed at $11.16 on the New York Stock Exchange [NYSEs] at a premium of 14.9 per cent to the offer price. In the month of May of the same year, Satyam was listed on New York Stock Exchange. In 2003, World Bank gives outsourcing contract to Satyam Services. Satyam solution bags CSI National IT Award for best packaged application. Satyam Computer Services honoured with prestigious IBM Lotus award In 2005, Satyam ranked 3rd in Corporate Governance Survey by Global Institutional Investors In 2006, Satyam receives AS9100 / EN9100 certification for its aerospace domain. On October 26, 2006 has announced that it has achieved global certification in the ISO 9001 [quality managements], ISO 20000 [information technology service management for Infrastructure Management Services & Network and Systems], & ISO 27001 [Information Security Managements] standards. With the successful audit of development center at Budapest, Hungary, all three certifications were conferred at an organization-wide level. In the same year, Revenues of Satyam crosses $1 billion. and Raju becomes chairman of Nasscom In 2007, Ernst & Young named Raju as the Entrepreneur of the Year.

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PRODUCTS OFFEREDSatyam Computer Services Limited offered quality services and solutions to the IT sector. Satyam was considered to be a global leader in this field catering to the Telecom-Infrastructure; Media-Entertainment-Semiconductors; Banking & Financial Service; Automotive;

Manufacturing; Insurance & Healthcare industries. Satyam Computer Services (Satyam) was a global information technology (IT) solutions company. The company offered a comprehensive range of services including application development, maintenance services, consulting and enterprise business solutions, extended engineering solutions and infrastructure management services. The company also offered business process outsourcing services through Nipuna, a majority owned subsidiary of the company. Satyam Computer Services was a leading global business and information technology services company that leverages deep industry and functional expertise, leading technology practices, and an advanced, global delivery model to help clients transform their highest-value business processes and improve their business performance. The company's professionals excelled in enterprise solutions, supply chain management, client relationship management, business intelligence, business process quality, engineering and product lifecycle management, and infrastructure services, among other key capabilities. The various services offered by the satyam included: Application Software Business process outsourcing Business value enhancement Consulting and Enterprise Solution Infrastructure Management Service Integrated Engineering Solution Product and Application Testing15

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DETAILS OF SCAM

Satyam Scam also referred to as Indias Enron, is the biggest corporate fraud of Indian History. The Satyam accounting fraud unveiled in Jan 2009 by confession and resignation from Chairman Ramalinga Raju brought to light the rationale behind the chain of controversies Satyam has been surrounded with. Raju started inflating accounts to benefit himself and his relatives by as early as mid-2000. He has been indulging himself in the activities to benefit himself without even considering the impact which it could have on Satyams stakeholders, debtors, creditworthiness, etc. and more particularly on him. In all total, the scam included four sides which has been stated below. Satyam and SES Merger - 2000 In mid-2000, Satyam Computers merged Satyam Enterprise Solutions in a way that hugely benefited Srinivas Raju, brother-in-law of B Ramalinga Raju, who was running SES. The merger ratio, fixed by KPMG, was 1:1. But, before the merger, Satyam Computers renounced 800,000 shares of SES in favour of Srini Raju at a price of Rs 10 when the shares were trading at Rs 1500 in the stock market. The 1:1 merger ensured that Srini Raju got 800,000 shares of Satyam Computers (paid for at Rs 10). Maytas Deal Dec 08 In Dec 2008, Satyam Computer Services Limited announced its plan to acquire controlling interest in two companies linked to the promoter family - Maytas Infrastructure and Maytas Property for $1.6 billion. Both the companys were owned by Satyams Chairman S Ramalinga Rajus sons. Maytas is Satyam spelt in reverse. The move aimed at transferring over Rs 6,000 crore of cash from Satyams shareholders to the pockets of the Rajus who controlled both Satyam and Maytas. Promoter had a stake of only 8.74% in Satyam while a stake of 36.64% in Maytas Infra, so it was a clear gain for Rajus.

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The argument provided by them was the acquisition was meant to de risk the business while the investors were busy figuring what would an IT company do buying a construction firm. Mutual funds and institutional investors were outraged. Satyams ADR crashed over 50% and after an ineffectual attempt to defend the decision, Chairman Ramalinga Raju gave in and cancelled the deal. The share price still fell 30%. It came down from a level of Rs. 235 on 1st December to Rs. 135 on 26th Dec. Satyam Barred from World Bank Dec 08 The World Bank barred Satyam in Dec 08, from doing any off-shore work with it for 8 years after spy software was discovered on workstations inside the bank's Washington headquarters, through which highly sensitive data were stolen. World Bank had signed a 5-year, $10-million contract with Satyam in 2003 to develop and implement an IT strategy at the World Bank, which was expanded over the years to a $100million deal. In 2005, the banks internal investigation unit began looking at the activities of the banks chief information officer, the Sri Lankan Mohamed Vazir Muhsin, considering a review if his retirement plan. He was ousted from the bank for intervening in awarding of the contract to Satyam and was also a preferential stock holder of the company. For unclear reasons Satyam was still in control of banks operations till it was temporarily suspended in February 08 and then completely ineligible, effective from the month of September for providing improper benefits to bank staff, failed to maintain documentation for fees charged and for an alleged data theft. The debarment of Satyam became public only in the month of December because of World Banks non-disclosure policy but later decided to make public the names of firm barred from doing any project with the world bank in the interest of fairness and transparency. Satyams share price after opening up at Rs. 163 fell to Rs. 140.4 on 23rd Dec after the news i.e. 13.55% down.17

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Satyam Accounting Scandal Jan 09On 7 January 2009, company Chairman Ramalinga Raju resigned after notifying board members and the Securities and Exchange Board of India (SEBI) that Satyam's accounts had been falsified. Raju confessed that Satyam's balance sheet as on 30th September, 2008 contained: inflated figures for cash and bank balances of 5,040 crore (US$1.09 billion) as against 5,361 crore (US$1.16 billion) reflected in the books. an accrued interest of 376 crore (US$81.59 million) which was non-existent. an understated liability of 1,230 crore (US$266.91 million) on account of funds was arranged by himself. an overstated debtors' position of 490 crore (US$106.33 million) (as against 2,651 crore (US$575.27 million) in the books). An overstated revenue of Rs 2700 crore (Rs 27 billion) for the September quarter and an operating margin of Rs 649 crore (24 per cent of revenue) as against the actual revenue of Rs 2112 crore (Rs 21.12 billion) and an actual operating margin of Rs 61 crore (3 per cent of revenue).

Fabricated Income Statement

Rs. Crore

Actual Reported Difference Cash and Bank Balance Accrued Interest on Bank FD's Understated Liability Overstated Debtors Total Revenues(Q2FY09) Opearting Profits18

321 Nil 1230 2161 2112 61

5361 376.5 None 2651 2700 649

5040 376.5 1230 490 7136 588 588

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On this Confession price of Satyam over the stock exchange after opening up at Rs. 179 saw a low of Rs 30.7. Raju has been inflating the accounts since 2001 and claimed in the same letter that neither he nor the managing director had benefited financially from the inflated revenues. He also claimed that none of the board members had any knowledge of the situation in which the company was placed. He stated that what started as a marginal gap between actual operating profit and the one reflected in the books of accounts continued to grow over the years. It has attained unmanageable proportions as the size of company operations grew significantly (annualized revenue run rate of 11,276 crore (US$2.5 billion) in the September quarter of 2008 and official reserves of 8,392 crore (US$1.86 billion)). As the promoters held a small percentage of equity, the concern was that poor performance would result in a takeover, thereby exposing the gap. The aborted Maytas acquisition deal was the last attempt to fill the fictitious assets with real ones. It was like riding a tiger, not knowing how to get off without being eaten. As the promoters held a small percentage of equity (2.18%), the concern was that poor performance would result in a takeover, thereby exposing the gap. The aborted Maytas acquisition deal was the final, desperate effort to cover up the accounting fraud by bringing some real assets into the business. When that failed, Raju confessed the fraud. The promoters of Satyam had been significantly decreasing their stake in the company every quarter brought down from 25.6% in March 01 to a level of only 2.18% in Dec 09 before the fraud was finally unveiled. Mar Particulars Promoter's Holding % '01 Mar '02 Mar '03 Mar '04 Mar '05 Mar '06 Mar '07 Mar '08 Dec '08

25.6

22.26

20.74

17.35

15.67

14.02

8.79

8.74

2.18

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Raju also stated in his letter that neither he, nor the Managing Director took even one rupee/dollar from the company and have not benefitted in financial terms on account of the inflated results, none of the board members, past or present, had any knowledge of the situation in which the company is placed. Even business leaders and senior executives in the company, such as, Ram Mynampati, Subu D, T.R. Anand, Keshab Panda/Virender Agarwal, A.S. Murthy, Hari T, SV Krishnan, Vijay Prasad, Manish Mehta, Murali V, Sriram Papani, Kiran Kavale, Joe Lagioia, Ravindra Penumetsa, Jayaraman and Prabhakar Gupta are unaware of the real situation as against the books of accounts, none of his or Managing Directors immediate or extended family members has any idea about these issues. After disclosing about the above facts, Raju also recommended the following steps: A Task Force has been formed in the last few days to address the situation arising out of the failed Maytas acquisition attempt. This consists of some of the most accomplished leaders of Satyam: Subu D, T.R. Anand, Keshab Panda and Virender Agarwal , representing business functions, and A.S, Murthy, Hari T and Murali V representing support functions. I suggest that Ram Mynampati be made the Chairman of this Task Force to immediately address some of the operational matters on hand. Ram can also act as an Interim CEO reporting to the board. Merrill Lynch can be entrusted with the task of quickly exploring some Merger opportunities.

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IMPACT OF SATYAM SCAM ON ITS SHARES

Satyams share price started to fell after the news of the scam came in. Satyam's shares made a low of 11.50 rupees on 9 January 2009, their lowest level since March 1998, compared to a high of 544 rupees in 2008. Satyam stock was removed from its S&P CNX Nifty 50-share index from Jan 12, 2009. Satyam was also excluded from the CNX 100 index, CNX 500 index and the CNX IT index. Reliance Capital Ltd replaced Satyam in the main index. Satyam lost more than 10000 Crore rupee in a single day trading. $8 Crore changed hands at BSE and 33 Crore changed hands at NSE.

The following Fund Houses sold shares heavily in the open market after the announcement of the scam : Swiss Finance Corp Mauritius Ltd: Sold 7786759 shares at Rs.74.61 Aberdeen International India Opportunities Mauritius Ltd:Sold 9830811 shares of the company at Rs.43.41. Aberdeen Asset Managers Ltd Aberdeen Global Asia Pacific fund: Sold 4179064 shares at Rs.43.41.

The NYSE also halted trading ADRs of Satyam after the scam.

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WHY DID RAJU COMMITTED THE FRAUD?What is known as of now is that over an extended period of time, the promoters decided to inflate the revenue and profit figures of Satyam. In the event, the company has a huge hole in its balance sheet, consisting of non-existent assets and cash reserves that have been recorded and liabilities that are unrecorded. According to the confessional statement of Mr. Raju, the balance sheet shortfall is more than Rs.7000 crore. Why did a leading company in one of Indias most successful industries of recent years need to inflate profits? After all, the revenues of Indias IT industry have grown at a scorching compound annual rate of almost 30 per cent in the past eight years, driven by exports. Why then did the fourth largest IT company choose to take the criminal route of falsifying accounts and indulging in fraud? One possible cause could be the desire to drive up stock values. The benefits derived by promoters from high stock values are obvious, allowing them to buy into real wealth outside the company and giving them the invasion money to acquire large stakes in other firms. This tendency was epitomised by the benefits derived by America Online when it merged with Time Warner. Although the latter had more assets, revenues, and customers, AOLs higher market capitalisation led to that company and its chairman, Steve Case, getting more out of the deal than did long-time giant Time Warner. There is some suspicion that Mr. Raju and his family may have sought similar benefits. The family chose to build its shareholding in Satyam Computer Services and shed it when required. For example, in year 2000 Satyam Computer merged with a related company, Satyam Enterprises. Rajus cousin, C. Srinivasa Raju, who held 800,000 shares, or 19 per cent, in Satyam Enterprises, was reportedly allotted an equivalent number in Satyam Computer, leading to criticism that relative prices did not justify the 1:1 swap. But the original promoters share held by the Raju family and their subsequent acquisitions were not for keeping. Though the precise numbers quoted vary, according to observers the stake of the promoters fell sharply after 2001 when they held 25.60 per cent of equity in the company. This fell to 22.26 per cent by the end of March, 2002, 20.74 per cent in 2003, 17.35 per cent in 2004, 15.67 per cent in 2005, 14.02 per cent in 2006, 8.79 in 2007, 8.65 at the end of September 2008,22

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and 5.13 per cent in January 2009 (Business Line, January 3, 2009). The most recent decline is attributed to the decision of lenders from whom the family had borrowed to sell the shares that were pledged with them. But the earlier declines must have been the result either of sale of shares by promoters or of sale of new shares to investors. According to audited balance sheet figures (if they are to be trusted) available from the CMIEs database, the paid-up equity in Satyam Computer Services rose from Rs. 56.24 crore in March 2000 to just Rs. 64.89 crore by March 2006 and further to Rs. 133.44 crore in March 2007. Overall, the number of shares held by the promoter group fell from 7.16 crore (22.8 per cent) to 5.8 crore (8.6 per cent) between September 2001 and September 2008. This points to a conscious decision by the promoters to sell shares, which may have been used to acquire assets elsewhere. The more inflated the share values, the more of such assets could be acquired. It is quite possible that the assets built up by the eight other Raju family companies under scrutiny, including Maytas Properties and Maytas Infra, partly came from the resources generated through these sales. If true, this makes Rajus confession suspect, since he stated that neither myself, nor the Managing Director (including our spouses) sold any shares in the last eight years excepting for a small proportion declared and sold for philanthropic purposes. This may not have been the only way in which resources were transferred out of Satyam Computer Services into other arms of the expanding Raju family empire. Money could have been siphoned out through opaque transactions with beneficiaries who were paid sums not warranted by their business profile. Satyams business strategy did involve unusual transactions. One example was the acquisition in 1999 by group company Satyam Infoway, which was the largest private Internet Services Provider in the country at that time, of IndiaWorld Communications, for a sum of $115 million. The acquired company operated popular portals such as samachar.com and khel.com that had no clear revenue model, and was the principal beneficiary just as in the AOL deal. According to reports, the owner of IndiaWorld was himself charged with intellectual property violations by his erstwhile employer IndiaWorld.com, an Internet services company managed by U.S.-based ASAP Solutions Inc. Satyam Infoways position was that it was aware of the claim being made by ASAP Solutions, but that its interest was not in IndiaWorld.com but was limited to the URL indiaworld.co.in and the other portals23

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under its banner, for which it had of course paid a huge sum. There is reason to suspect that this acquisition delivered little to the company, raising questions about the motivation. Mr. Rajus confession is also suspect for another reason, which has been widely discussed in the media. Even if he and his colleagues were inflating revenues and profits, the actual revenue earning capacity of the company, as confessed by him, seems to be extremely low. He claims that the huge difference between actual and reported profits in the second quarter of 2008-09 was because the ratio of operating margins to revenues was just 3 per cent rather than the reported 24 per cent. But even if Satyam Computer Services was cooking its books, it was engaged in activities similar to that undertaken by other similarly placed IT or ITeS companies and it too had a fair share of Fortune 500 companies on its client list. It is known that many of these companies have been showing operating margins that are closer to the 24 per cent reported by Satyam than the 3 per cent revealed in Mr. Rajus confession. Thus in financial year ending March 2008, the ratio of profits before tax of Infosys was 32.3 per cent of its total income, that of TCS 23.1 per cent, of Satyam 27.8 per cent, and that of Wipro 19.2 per cent. This suggests that either Mr. Raju is exaggerating the hole in his balance sheet or there is some other, more complex, and more disturbing explanation. But whatever it is, the difference between 24 per cent and 3 per cent seems too large to be the industry standard. Despite its award-winning reputation for corporate governance, its impeccable board with highprofile independent directors, and its appointment of big-four member PwC as its auditor, this still mysterious accounting fraud occurred. The full truth, it appears, is not yet out.

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WHAT WAS THE AUDITORS RESPONSIBILITY?Satyam's bogus accounts had been audited by Price Waterhouse, the Indian auditor that has been a member firm of PricewaterhouseCoooper International since 2000-01. The company balance sheet as at March 31, 2008 was signed off by Srinivas Talluri, a partner of Price Waterhouse in Hyderabad, the southern Indian city where Satyam was based. With all the Satyam mess yet to be fully sorted out, my concerns are directed towards PricewaterhouseCoopers, the auditing firm hired by them. Inasmuch the fault lies with the top brass for trying to cook books, it is another thing for the entrusted watchdogs to fail in their duty. An accounting failure can mean one of two things: Either PwC was hand in hand with Satyam or whatever documents provided to them were false and forged by Satyam honchos themselves. PwC failed miserably in it's duties. But if there was some sort of forgery then more than 2-3 people would have to be involved, going against the logic suggested by Ramalinga Raju that not many on the board knew the truth.

Several articles claim that DSP Merrill Lynch found out immediately (they were apparently approached for help with a merger) that there were serious accounting issues, while PwC found out nothing for years. Merrill Lynch, meanwhile, had been retained by Satyam ten days before Mr Raju's confession, to explore merger opportunities for the outsourcing giant, which was already struggling with corporate governance issues. Hours before Mr Raju admitted to the fraud, the investment bank severed its ties with the company. We came to understand that there were material accounting irregularities, which prompted our decision, a spokesman for Merrill said. PwC and Price Waterhouse would not comment yesterday, citing client confidentiality, although Price Waterhouse added that it would co-operate with the regulators.25

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Dennis Beresford, a former chairman of the Financial Accounting Standards Board, the US accounting watchdog, said: It's hard to miss $1 billion of cash. The role of PWC has been widely criticised for overlooking the manipulations mooted by B Ramalinga Raju, the founder and former Chairman of Satyam Computers.

Soon after their arrest, the PwC executives were sent to judicial remand till February 6. The fraud-hit Satyam has been struggling for survival since January 7 when its founder Ramalinga Raju resigned as chairman revealing profits have been overstated for years and that one billion dollars in cash on the books did not exist.

In the latest developments, the auditors have been slapped with charges of cheating, forgery, criminal breach of trust and criminal conspiracy as per the Indian Penal Code. Matter stands postponed on 27th. On 28th, we have to issue notice to the public prosecutor for the matter to be taken up.and they have been remanded to judicial custody till the 6th of February, said Mastan Naidu, counsel for the arrested executives of PricewaterhouseCoopers.

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STEPS TAKEN BY REGULATORY AUTHORITIESSEBI: In one of the most significant changes post-Satyam, the SEBI Committee on Disclosures and Accounting Standards (SCODA) has issued a discussion paper containing some specific proposals that could result in changes to Clause 49 of the listing agreement. Post Satyam Scandal broke in Jan, Maytas Infra made a shocking revelation to BSE in Feb, that three of its promoters B Ramalinga Raju, B Rama Raju and B Nandini Raju had pledged their entire holdings of 15.14 percent to lenders. That made SEBI rethink on Corporate Governance issues bringing new rules in Feb 09, requiring greater disclosure by promoters of their shareholding and any pledging of shares to third parties.

The key recommendations (or proposals for discussion as the SCODA appears to solicit views on certain issues without taking concrete positions) were as follows: The appointment of the CFO is to be approved by the Audit Committee after assessing the qualifications, experience and background of the candidate. The SCODA did not find it necessary to prescribe particular professional qualifications for the CEO. Rotation of audit partners every five years. The SCODA did not go down the path of insisting on rotation of audit firms. Voluntary adoption of International Financial Reporting Standards (IFRS) by listed entities, so as to ensure a state of preparedness by 2011 when the Indian standards are expected to be converged with IFRS. Interim disclosure of balance sheets (audited figures of major heads) on a half-yearly basis. Streamlining of timelines for submission of various financial statements by listed entities as required under the listing agreement.

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COMPANY LAW BOARD: After the scandal, on 10 January 2009, the Company Law Board decided to bar the current board of Satyam from functioning and appoint 10 nominal directors. GOVERNMENT OF INDIA: On 5th February 2009, the six-member board appointed by the Government of India named A. S. Murthy as the new CEO of the firm with immediate effect. The board consisted of: Banker Deepak Parekh. IT expert Kiran Karnik. Former SEBI member C Achuthan S Balakrishnan of Life Insurance Corporation. Tarun Das, chief mentor of the Confederation of Indian Industry and T N Manoharan, former President of the Institute of Chartered Accountants of India. ICAI: India's chartered accountancy regulator urged the government to tighten laws governing the profession to avoid frauds. A panel set up by the Institute of Chartered Accountants of India (ICAI) recommended that the names of errant accountants be made public and a corporate governance code be defined for independent directors, audit committees and chief financial officers of publicly listed companies. The high-power committee made the suggestions in a report to the ministry of corporate affairs (MCA) after its approval by the Icai council, a core group at the regulator entrusted with taking key decisions. The findings were given to MCA, ICAI's parent ministry, in May. Mint has reviewed a copy of the report.

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"We have made recommendations which are both for better regulation of the profession as also empowerment of auditors in the report," said Amarjit Chopra, ICAI president. "The idea is to make sure that scams like Satyam do not surface again." ICAI is currently investigating the role of S. Gopalakrishnan and Srinivas Talluri, two senior Price Waterhouse, Bangalore, partners who were recently been released on bail. The two were found prima facie guilty of misconduct by Icai along with four others, including V. Srinivas, former Satyam chief financial officer, and V.S. Prabhakara Gupta, former head of the company's internal audit cell. Gopalakrishnan, who was an ICAI council member, was removed as a member of its specialized committees. According to the report submitted to the ministry, there had been a failure of corporate governance at Satyam. Investigations thus far reveal that resolutions submitted to banks for loans were not even entered in the minutes of board meetings and that the audit committee was unaware of these transactions "Therefore, it is recommended that in the case of listed companies, the details of bank balances, loans, advances, both secured and unsecured, should be submitted to the audit committee every quarter," according to the report. An audit committee oversees financial reporting and disclosure. The report also wants the government to encourage whistle-blowers on issues relating to corporate governance of listed companies.

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STEPS TAKEN BY LAW ENFORCING AUTHORITIESThe founder of Satyam was arrested two days after he admitted to falsifying the firm's accounts. Ramalinga Raju is charged with several offences, including criminal conspiracy, breach of trust, and forgery by A.P.Police. Andhra Pradesh police conducted a raid on the Hyderabad office of PricewaterhouseCoopers (PwC), the former auditor of Satyam Computer Services, as part of the probe into the Rs.70 billion fraud by the IT bellwether.

Crime Investigation Department (CID) officials said a team raided the PwC office in the up market Jubilee Hills and seized documents and other records.

The raid was conducted after Satyam's former chief financial officer Vadlamani Srinivas told investigators that the auditors never pointed out any deficiencies in the accounts. THE CENTRAL Bureau of Investigation (CBI) on Tuesday, November 24, 2009 finally got an assessment of the accounting fraud of the Satyam Computers, saying that it is worth more than Rs 14,000 crores. The amount was initially estimated as Rs 7,800 as per the information given by the tainted Chairman B Ramalinga Raju. The Rs 14,000 crores figure was reached after counting the losses suffered by both institutionalised investors and individual investors. The DIG of police Lakshminarayana said that Ramalinga Raju and other promoters also took loans to the tune of Rs 1,220 crores by bogus, forged board resolutions in addition to the earlier loan he took in the name of 37 firms floated by him and his family members. He also revealed that Ramalinga Raju had created fake customers and inflated revenues by fake invoices to the tune of Rs 430 crores. The probing agency has also identified properties worth Rs 350 crores, including six thousand acres of land and 40,000 square feet of housing plots.

With this chargesheet, the probe has come to an end. It had required a multi disciplinary team to complete this probe, with the team including income tax, enforcement directorate and Reserve bank of India officials.30

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STEPS TAKEN BY PWCChennai, March 5 (IANS) Global audit firm PricewaterhouseCoopers (PwC) is cleaning up its Indian stables in the wake of the accounting scandal in Satyam Computer Services. According to a statement by the firm, an advisory board is being set up to provide guidance to the PwC leadership on its strategy and actions. This board will comprise five members, four of whom will be from outside the PwC network and will be leading individuals of repute and standing in India, PwC haD said. This comes after two of its partners were in the dock for the corporate fraud at Satyam Computer Services, the board of the software company gave it the sack notice and it was indicted by the Institute of Chartered Accountants of India (ICAI) for the scam. PwCs global network fully supports the steps taken by the leadership of our member firm in India, Samuel A. DiPiazza Jr., CEO of PricewaterhouseCoopers International, was quoted as saying in the statement Thursday. India is a very important market for PwC and one that we are committed to supporting and developing.- said by one of PWC officials. The Indian arm of the audit firm has asked the PwC global network to identify a senior partner from another PwC member firm to serve as the fifth member of the board. PwC India will be thoroughly reviewing its work and processes and to oversee this activity, a new head of quality assurance and risk management will be appointed. Its Hyderabad office will be placed under a new management after suspending two of its partners who were involved in auditing the fraud-hit Satyam Computer Services.

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Trying to absolve PwC from the Satyam fraud, Ramesh Rajan, chairman of PwC India, said in a statement: Pricewaterhouse appreciates the profound impact that the fraud perpetrated by the previous management of Satyam Computer Services Ltd has had on business confidence in India. The firm remains keen to understand the nature and extent of the fraud that took place at Satyam which was clearly designed to, and did, circumvent the audit process. PwC resigned as the statutory auditor by Satyam Computer Services after the latters board recommend the audit firms removal to the government.

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SATYAM AFTER SATYAM SCAM

After the Satyam Scam, there has taken place a major change in the company and its management. After the scandal broke, the then-board members elected Ram Mynampati to be Satyam's interim CEO. In April 09, Venturbay Consultants Pvt Ltd., a 100% subsidiary of Tech Mahindra successfully bid for Satyam through which Tech Mahindra acquired 43% stake in Mahindra Satyam resulting in equity infusion of US $ 582 million. It now operates under the brand Mahindra Satyam with C.P Gurnami as the current CEO. As a result of the scandal, under the directions of the new Mahindra management team, Satyam Computer Services restated its financial results for the period 2002 to 2008. These restated results were published in September 2009. On June 21, 2009 Company unveiled its new brand identity, Mahindra Satyam. It was stated in the annual report that this strategic move paves the way for the emergence of a robust brand which draws from the Core Values of the Mahindra Group and the inherent strength of Satyam brand. The new vision of Mahindra Satyam is

'Business transformation, Together'!

Business Transformation, Together

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SATYAM SCAM AND CORPORATE GOVERNANCEAnalysts said that the Satyam case illustrated the need for reform of corporate governance in India. Saurabh Mukherjea, of Noble, the London-based investment bank, said: We have run into listed companies where the advisory arms of the audit firm earn consultancy fees for help with M&A, new entity structuring and tax minimisation. In most Western countries rules limit such activities, which could trigger conflicts of interest for auditors. A good corporate governance is one where a firm commits & adopts ethical practices across its entire value chain & in all of its dealing with a wide group of stakeholders encompassing employee, customer, vendors, regulators & shareholders in both good and bad times. Corporate governance includes various parties: Shareholders Employees Management Bankers Government

Governance issue at Satyam arose because of non fulfillment of obligation of the company towards the various stakeholders. It proved a poor relationship with all the stakeholders. It is well known that a shareholder has a right to get information from the organization, such information could be with respect to the merger and acquisition. Shareholders expect transparent dealing in an organization. They even have right to get the financial reporting and records. In the case of satyam, the above obligations were never fulfilled. The acquiuisition of maytas infrastructure and properties were announced, without the consent of shareholders. They were even provided with false inflated financial reports. The shareholders were cheated.

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It is well known that the collapse of any organizations reputation has a diect impact on the employees job. As per the case, employees were shown with a inflated figure. The excess of employees in the organization were kept under VIRTUAL POOL who received just 60% of their salaries and several were removed. The entire scam had its impact on management. Questions were raised over the credibility of management. Any organization has its obligation towards the Government by means of timely payment of taxes and abiding by the rules and laws framed up by the Government. As per the case with satyam , the company did not pay advance tax for the financial year 2009. As per the rule, the advance tax is to be paid 4 times a year; such was not fulfilled by them. Finally the satyam computer consultancy limited didnt have good relationship with its bank too. SCS was blacklisted by World Bank over charges of Bribery.It was declared ineligible for contracts to providing: Improper benefit to bankstaff. Failing to maintain documentation to support fees.

The revelation further deepened concerns about poor corporate governance practices at the company. The case describes the corporate governance structure at Satyam, its code of conduct, roles and responsibilities of different committees under the board, whistle blower policy etc. It highlights the role played by the independent directors of

Satyam in approving the Maytas deal and discusses their limitations. In case of satyam fraud, board was unable to fulfill its role & responsibilities. Now we discuss the responsibilities that should be followed ethically by board and what it actually did

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Ethical responsibilities: Governing the organization by establishing broad policies and objectives Selecting, appointing, supporting and reviewing the performance of the chief executive Ensuring the availability of adequate financial resources Approving annual budgets Accounting to the stakeholders for the organization's performance

Actual scenario: Despite the shareholders not being taken into confidence, the directors went ahead with the management's decision The Government too is equally guilty in not having managed to save the shareholders, the employees and some clients of the company from losing heavily Simple manipulation of revenues and earnings to show superior performance Raising fictitious bills for services that were never rendered Increased the Cash & bank balance Operating profits were artificially boosted

So when the case came in light following are the actions that has been taken: Nasscum sets up panel to avoid satyam like case in future- formed a corporate Governance & ethics committee, chaired by N.R.Narayana Murthy (chairman and chief mentor of Infosys) Hinduja Global chalks out 100 day plan for satyam Year ban on satyam to be reviewed

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HOW DO ANALYST VIEW TECH MAHINDRA-SATYAM MERGER ?The merger of Tech Mahindra and Mahindra Satyam (Satyam Computer Services) is largely seen as a positive deal by analysts, considering that the combined entity will become sixth largest software services provider and will have a balanced revenue mix as it would lower client concentration. British Telecom's share of total revenue will now come down to about 18% from 35% and the overall telecom sector contribution will fall to 47% from 96%, thus reducing risks. Tech Mahindra and Mahindra Satyam's boards approved merger of the two firms on Wednesday. The combined entity will have revenue of USD 2.4 billion, 75,000 employees and 350 clients. The swap ratio for the merger of Mahindra Satyam with Tech Mahindra has been fixed at 8.5 shares of Satyam for every one share of Tech Mahindra. Mahindra Satyam shares were up over 4% at Rs 80.85 on NSE on Thursday in noon trade. Tech Mahindra also gained 4.2% at Rs 713.90. Here's how analysts view Tech Mahindra-Satyam merger: Edelweiss: We expect the combined entity to become a formidable competition in the scale player league with complementary skill sets and a well balanced revenue mix. MF Global: Investor concerns regarding the merger ratio have been allayed with the merger ratio being largely in tandem with the current market price. While we believe that the combined entity will benefit from synergies with respect to size and mix, it is too early to say whether it will result in superior growth rates in the near term. Rating: Neutral (Tech Mahindra). Motilal Oswal: The joint entity will have a unified 'go-to-market' strategy and a more diversified revenue footprint geographically. The combination will benefit from operational synergies, economies of scale, sourcing benefits, and standardization of business processes. Rating: Neutral (Tech Mahindra). Prabhudas Lilladher: We see improved ability of the merged entity to bid for the larger projects, but the crux would be a seamless integration of the entities and reaping the benefits. We see a daunting task for the management ahead, hence would wait before flagging a rerating. Rating: Accumulate (Tech Mahindra).

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INVESTORS STUNNED:For the last couple of days outside the Bombay Stock Exchange, all anyone can talk about at the chai stalls and sandwich stores is how Ramalinga Raju, the former boss of Satyam Computers, managed to rack up a billion-dollar fraud right under their noses. Investors in Indian shares were stunned by Mr Raju's revelation, in a letter to the stock exchange this Wednesday, when he confessed his wrongdoing and admitted that he had effectively cooked the books of his firm for the last several years. Satyam's shares plummeted on the news by 75%, dragging down India's stock main market by 7%. "I can't believe it," says investor Rajiv Gupta outside the stock market. "It's very worrying, and it's happened at the worst possible time. Markets here were just started to look like they were recovering. But this news - it is very very bad." Ashok Bakliwal, another investor, agrees: "This will put the spotlight on Indian companies, and overseas investors will be wary of putting their money here without taking a good, hard look at the company's books." "As if India wasn't going through enough of a bad time - now this? I really don't know what will happen next. How could a fraud of this magnitude take place and go unnoticed? " What went wrong? It's a question that everyone is asking. The controversy has got many in corporate circles here wondering whether it was India's new found love affair with capitalism that led to Satyam's downfall. In the letter to his shareholders, Mr Raju says that he was trying to cover up the losses at Satyam, and in doing so got Chanda Kochar, joint managing caught up in a vicious cycle of lies and debts. director, ICICI Bank He says this attempt to hide the losses from investors and38

It's

a

wake-up

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SATYAM SCAM

shareholders was like "riding a tiger, not knowing how to get off without being eaten". According to Mr Raju's statement, about $1bn (0.65bn), or 94% of the cash on the company's books, was made up - and analysts say it was the manipulation of the cash flow which could have been one reason why the deceit was undetected. Many analysts also say that the chase for huge profits, and the desire to keep up with the breakneck speed of India's $50bn outsourcing industry's growth rates that may have been behind Mr Raju's motivation in fudging the accounts at his firm. Disappeared But trying to get any answers from Mr Raju since his confession letter is proving to be impossible - he has disappeared.

A company spokesperson has been quoted as saying that his whereabouts remain unclear for now. At a company press conference on Thursday, the acting chief executive Ram Mynampati told journalists that he and other board members had no knowledge of the financial fraud and were hoping to get back to business as soon as possible. "Our only aim at this time is to ensure that the business continues," Mr Mynampati says. But it will be some time before it is business as usual for the troubled tech firm. Indian media is reporting that financial regulators have despatched investigators to Hyderabad to launch a formal investigation into the case. India's main stock exchanges have announced they are removing Satyam Computers from their indices as of January 12 because of the stunning revelations Leading members of Indian industry have also expressed their shock and disappointment that such an audacious act of deception could take place. Chanda Kochar, the joint managing director of ICICI Bank, one of India's biggest lenders, says she is shocked by the news.39

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How this could be avoided in future? /Recommendations:The Satyam Computer Services scandal brought to light the importance of ethics and its relevance to corporate culture. The fraud committed by the founders of Satyam is a testament to the fact that the science of conduct is swayed in large by human greed, ambition, and hunger for power, money, fame and glory. The Satyam scandal is a classic case of Negligence of fiduciary duties, Total collapse of ethical standards, Lack of corporate social responsibility.

It is human greed and desire that led to fraud. This type of behavior can be traced to: Greed overshadowing the responsibility to meet fiduciary duties, Fierce competition and the need to impress stakeholders especially investors, analysts, shareholders, and the stock market, Low ethical and moral standards by top management, Greater emphasis on short term performance. Some of the initiatives/ steps which an organisation can undertake in order to avoid future Satyam are: Lasting solutions can only be found by transforming human consciousness through an inner discipline and higher moral reasoning. A company can build sustainable competitive advantage through ethics, values, excellence, quality, social responsibility and human development. An integrated, value based vision of leadership and governance will go along in creating corporate governance. A transformed organizational culture which pays highest attention to ethical conduct and moral values will strengthen sustainable roots of the company. Transparency and effective auditing and regulatory checks through internal and external auditors and monitoring agencies will help establish long lasting credibility for any company. Companies should gather feedback, measure effectiveness, and continually improve their code of conduct.40

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The top management should always distinguish between opportunities and temptations. No matter what heights a person may reach, character must be maintained at any cost. Companies must take a step back when presented with challenging decisions and individual must listen to the little voice in their head in complying with law and to their heart in dealing with people. When making corporate decisions, it is important to not lose sight of the individuals ethical reasoning. Personal ethics, self-discipline, and high moral reasoning are critical to avoiding unethical behavior. Transparency in financial reporting as a moral duty and ethical conduct is also very important for companies to adhere to in order to uphold ethical standards. Benefits from such engagement include higher trust and loyalty from stakeholders, increased goodwill, and higher investor confidence. It is also important for companies to establish an organizational culture which supports ethical conduct through a code of conduct and properly laid out corporate governance policies and procedures. Advantages of this approach include fostering ethical behavior from employees, increased inner discipline, and providing value based corporate vision. A lot of fraud schemes start out small, with the perpetrator thinking that small changes here and there won't make a big difference- and is less likely to be detected. This sends a message to a lot of companies: if your accounts aren't balancing or if something seems inaccurate, even just a tiny bit, it's worth investigating. Break down tasks so that there are checks in each area. Dividing responsibilities across a team of people makes it easier to detect irregularities or misappropriated funds. Companies must be careful when selecting executives and top level managers. These are the people who set the tone for the company- if there's corruption at the top; it's bound to trickle down. Each employee must be accountable for their actions, regardless of the role they play in the company. Separate the role of CEO and Chairman of the Board. When the same person takes on both roles, who left to check up on the CEO? Splitting up the roles helps avoid situations like the one at Satyam.

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LEARNINGS:

Satyam fraud spurred the government of India to tighten corporate norms to prevent recurrence of similar frauds in future. The government took action to protect the interest of the investors and safeguard the credibility of India and the nations image across the world. It has forced the government to rewrite corporate governance rules and tightens the norms for chartered accountants. Some of the regulations include: Promotion of shareholders democracy with protection of rights of minority Shareholders. Responsible self-regulation with adequate disclosure and accountability and Lesser government control over internal corporate processes, Voluntary corporate governance code, Certificate of independence for independent directors, An institution of mechanism for whistle blowers, Cap at 10 percent on the revenues coming from a single client to an audit firm. Promoters should be prohibited from interfering in the recruitment of independent directors. Independent directors should have challenging, skilled IDs, who have time to devote to the business, rather than well-known faces. Additional lessons include having an effective whistle blower policy in place, education on ethical values, criteria for remuneration to key personnel, and strengthening of quality review. Corporate governance framework needs to be implemented in letter as well as spirit. The increasing rates of white collar crimes demands stiff penalties and punishment. The small distortions created by few immoral executives lad far reaching negative consequences. Hopefully, creating an awareness of the large consequences of small lies may help some to avoid this trap.

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REFERENCES

www.satyam.com

www.icai.org

www.google.com

www.business-standard.com

www.bullrider.in

www.indiastudychannel.com

www.reportlinker.com

www.source2update.com

www.yahoo.com

www.wikipedia.org The Telegraph : Text of Mr. Ramalinga Rajus statement www.mca.gov.in www.sebi.gov.in

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THE SATYAM SCAM

A Dissertation submitted to Prof. S. Prakash Prepared by:

VARUN MUSADDI ROLL NO. 334 ROOM NO. 12 B.COM(H) ACCOUNTING AND FINANCE ST. XAVIERS COLLEGE, KOLKATA

THE END

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