Satyam scandalFrom Wikipedia, the free encyclopedia

The Satyam Computer Services scandal was a corporate scandal that occurred in India in 2009 where chairmanRamalinga Raju confessed that the company's accounts had been falsified. The Global corporate community was shockedand scandalised when the chairman of Satyam, Ramalinga Raju resigned on 7 January 2009 and confessed that he hadmanipulated the accounts by US$1.47-Billion.

Contents

1 Role of Auditors2 Aftermath3 New CEO and special advisors4 Acquisition by Mahindra Group5 See also6 References7 External links

Role of Auditors

PricewaterhouseCoopers was the statutory auditor of Satyam Computer Services when the report of scandal in the accountbooks of Satyam Computer Services was broke out. The Indian arm of PwC was fined $6 million by US Securities andExchange Commission for not following the code of conduct and auditing standards while pursuing its duties while auditing

the accounts of Satyam Computer Services.[1]

Aftermath

Ramalingam Raju along with 2 other accused of the scandal, had been granted bail from Supreme court on 4 November2011 as the investigation agency CBI failed to file the chargesheet even after more than 33 months Raju being arrested.

Raju had appointed a task force to address the Maytas situation in the last few days before revealing the news of theaccounting fraud. After the scandal broke, the then-board members elected Ram Mynampati to be Satyam's interim CEO.Mynampati's statement on Satyam's website said:

"We are obviously shocked by the contents of the letter. The senior leaders of Satyam stand united in theircommitment to customers, associates, suppliers and all shareholders. We have gathered together atHyderabad to strategize the way forward in light of this startling revelation."

On 10 January 2009, the Company Law Board decided to bar the current board of Satyam from functioning and appoint10 nominal directors. "The current board has failed to do what they are supposed to do. The credibility of the IT industryshould not be allowed to suffer." said Corporate Affairs Minister Prem Chand Gupta. Chartered accountants regulatorICAI issued show-cause notice to Satyam's auditor PricewaterhouseCoopers (PwC) on the accounts fudging. "We haveasked PwC to reply within 21 days," ICAI President Ved Jain said.

On the same day, the Crime Investigation Department (CID) team picked up Vadlamani Srinivas, Satyam's then-CFO, for

questioning. He was arrested later and kept in judicial custody.[2]

On 11 January 2009, the government nominated noted banker Deepak Parekh, former NASSCOM chief Kiran Karnikand former SEBI member C Achuthan to Satyam's board.

Analysts in India have termed the Satyam scandal India's own Enron scandal.[3] Some social commentators see it more as a

part of a broader problem relating to India's caste-based, family-owned corporate environment.[4]

Immediately following the news, Merrill Lynch (now a part of Bank of America) and State Farm Insurance terminated its

engagement with the company. Also, Credit Suisse suspended its coverage of Satyam.[citation needed]. It was also reportedthat Satyam's auditing firm PricewaterhouseCoopers will be scrutinised for complicity in this scandal. SEBI, the stock

market regulator, also said that, if found guilty, its license to work in India may be revoked.[5][6][7][8][9] Satyam was the2008 winner of the coveted Golden Peacock Award for Corporate Governance under Risk Management and Compliance

Issues,[10] which was stripped from them in the aftermath of the scandal.[11] The New York Stock Exchange has halted

trading in Satyam stock as of 7 January 2009.[12] India's National Stock Exchange has announced that it will remove

Satyam from its S&P CNX Nifty 50-share index on 12 January.[13] The founder of Satyam was arrested two days after headmitted to falsifying the firm's accounts. Ramalinga Raju is charged with several offences, including criminal conspiracy,breach of trust, and forgery.

Satyam's shares fell to 11.50 rupees on 10 January 2009, their lowest level since March 1998, compared to a high of 544

rupees in 2008.[14] In New York Stock Exchange Satyam shares peaked in 2008 at US$29.10; by March 2009 they weretrading around US$1.80.

The Indian Government has stated that it may provide temporary direct or indirect liquidity support to the company.

However, whether employment will continue at pre-crisis levels, particularly for new recruits, is questionable .[15]

On 14 January 2009, Price Waterhouse, the Indian division of PricewaterhouseCoopers, announced that its reliance onpotentially false information provided by the management of Satyam may have rendered its audit reports "inaccurate and

unreliable".[16]

On 22 January 2009, CID told in court that the actual number of employees is only 40,000 and not 53,000 as reportedearlier and that Mr. Raju had been allegedly withdrawing 200 million (US$3 million) every month for paying these 13,000

non-existent employees.[17]

New CEO and special advisors

On 5 February 2009, the six-member board appointed by the Government of India named A. S. Murthy as the new CEOof the firm with immediate effect. Murthy, an electrical engineer, has been with Satyam since January 1994 and was headingthe Global Delivery Section before being appointed as CEO of the company. The two-day-long board meeting alsoappointed Homi Khusrokhan (formerly with Tata Chemicals) and Partho Datta, a Chartered Accountant as special

advisors.[18][19]

Acquisition by Mahindra Group

On 13 April 2009, via a formal public auction process, a 46% stake in Satyam was purchased by Mahindra & Mahindraowned company Tech Mahindra, as part of its diversification strategy. Effective July 2009, Satyam rebranded its services

under the new Mahindra management as "Mahindra Satyam". After a delay due to tax issues[20][21] Tech Mahindraannounced its merger with Mahindra Satyam on 21 March 2012, after the board of two companies gave the

approval.[22][23] The companies are merged legally on 25 June 2013.[24][25]

See also

Corruption in India

References

1. ^ "SEC Charges India-Based Affiliates of PWC for Role in Satyam Accounting Fraud"

1. ^ "SEC Charges India-Based Affiliates of PWC for Role in Satyam Accounting Fraud"(http://www.sec.gov/news/press/2011/2011-82.htm). Securities and Exchange Commission. 5 April 2011. Retrieved 27April 2013.

2. ^ Satyam ex-CFO Vadlamani Srinivas sent to judicial custody till Jan 23(http://economictimes.indiatimes.com/articleshow/3964323.cms). The Economic Times. (11 January 2009).

3. ^ Satyam scandal could be 'India's Enron' (http://www.msnbc.msn.com/id/28539007/) – World business- msnbc.com(updated 11:42 a.m. ET 7 January 2009)

4. ^ The Caste of a Scam: A Thousand Satyams in the Making (http://kafila.org/2009/02/13/the-caste-of-a-scam-a-thousand-satyams-in-the-making/). Kafila.

5. ^ Satyam scandal rattles confidence in accounting Big Four(http://in.reuters.com/article/companyNews/idINHKG30879120090108). In.reuters.com.

6. ^ ICAI to seek explanation from Satyam’s auditor PwC (http://www.livemint.com/2009/01/07165018/ICAI-to-seek-explanation-from.html). Livemint.com (7 January 2009).

7. ^ Satyam auditor says examining chairman's statement(http://www.reuters.com/article/marketsNews/idINBMA00213420090107?rpc=44). Reuters.com (7 January 2009).

8. ^ What happens to PWC, The Auditor For Satyam? (http://www.vccircle.com/500/news/what-happens-pwc-the-auditor-for-satyam)

9. ^ Satyam: Auditors' body to pull up PwC ICAI to seek explanation from Satyam’s auditor PwC(http://www.rediff.com/money/2009/jan/07satyam-satyam-auditors-body-to-pull-up-pwc.htm). Rediff.com.

10. ^ http://www.goldenpeacockawards.com/GPA_RESULTS_ANNOUNCEMENT_2008.pdf

11. ^ Satyam stripped off Golden Peacock Global Awards(http://economictimes.indiatimes.com/Infotech/Software/Satyam_stripped_off_Golden_Peacock_Global_Award/articleshow/3949334.cms) – Software-Infotech-The Economic Times (8 Jan 2009, 0118 hrs IST, PTI)

12. ^ NYSE halts trading in Satyam stock (http://sify.com/finance/fullstory.php?id=14832532&?vsv=TopHP1) – (Wednesday,7 January 2009, 23:02) Sify.com

13. ^ Satyam Computer Services Ltd (SAY.N) Key Developments (Stocks) Reuters.com(http://www.reuters.com/finance/stocks/keyDevelopments?symbol=SAY.N&timestamp=20090107142400&rpc=66)

14. ^ Indian IT scandal boss arrested (http://news.bbc.co.uk/2/hi/business/7821087.stm) – 9 January 2009 – Business – BBCNEWS

15. ^ Ready to bail out Satyam, if required: Govt (http://www.moneycontrol.com/india/news/business/ready-to-bail-out-satyam-if-required-govt/377175). Moneycontrol.com (13 January 2009).

16. ^ Price Waterhouse says its Satyam audits relied on company information, could be wrong(http://hosted.ap.org/dynamic/stories/A/AS_INDIA_SATYAM_PRICEWATERHOUSE?SITE=KFWB&SECTION=HOME&TEMPLATE=DEFAULT) – 14 January 2009 – Associated Press

17. ^ Satyam fudged FDs, has 40,000 employees: Public prosecutor(http://timesofindia.indiatimes.com/India_Business/Satyam_fudged_FDs_has_40000_employees_Public_prosecutor/articleshow/4015830.cms). The Times of India.

18. ^ Satyam Names Murty as CEO to Replace Arrested Founder (http://www.bloomberg.com/apps/news?pid=20601091&sid=aTQj1hK_OeXA&refer=india) – (5 February 2009, 1813 hrs IST) Satyam Names Murty as CEO toReplace Arrested Founder

19. ^ A S Murty appointed as Satyam CEO (http://www.moneycontrol.com/india/news/business/as-murty-appointed-as-satyam-ceo/384024) – (5 February 2009, 1816 hrs IST) A S Murty appointed as Satyam CEO Kiran

20. ^ moneycontrol.com (http://www.moneycontrol.com/news/business/mah-satyam-tech-mahindra-merger-may-be-delayed_522887.html). moneycontrol.com (15 February 2011).

21. ^ Mah Satyam-Tech Mah to appoint bankers to fasten merger (http://www.moneycontrol.com/news/business/mah-satyam-tech-mah-to-appoint-bankers-to-fasten-merger_581330.html). Moneycontrol.com (30 August 2011).

22. ^ /Tech Mahindra, Satyam get nod to merge (http://www.livemint.com/2012/03/21094345/Tech-Mahindra-Satyam-get-nod.html). Livemint.com (21 March 2012).

23. ^ High Court orders shareholders' meeting on MSat-Tech Mahindra merger (http://profit.ndtv.com/News/Article/high-court-orders-shareholders-meeting-on-msat-tech-mahindra-merger-304000/). Profit.ndtv.com (11 May 2012).

24. ^ Tech Mahindra completes Satyam merger, becomes 5th biggest IT firm – Economic Times(http://articles.economictimes.indiatimes.com/2013-06-26/news/40187424_1_satyam-merger-government-mediated-auction-tech-mahindra). The Economic Times. (26 June 2013).

25. ^ Satyam is history, merger with Tech Mahindra complete | Business Line (http://www.thehindubusinessline.com/industry-and-economy/info-tech/satyam-is-history-merger-with-tech-mahindra-complete/article4848975.ece). Business Line. (25June 2013).

External links

The Great Satyam robbery (http://businesstoday.digitaltoday.in/index.php?option=com_content&task=view&id=9744&sectionid=22&issueid=48&Itemid=1)

Satyam Chairman B. Ramalinga Raju's statement to the Board (http://www.hindu.com/nic/satyam-chairman-statement.pdf)

PricewaterhouseCoopers offices searched in Satyam probe(http://www.independent.co.uk/news/business/news/pricewaterhousecoopers-offices-searched-in-satyam-probe-

1334267.html)

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