imported>VedikaB30: /* Aftermath */

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Aftermath

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{{Short description|Corporate fraud}}
{{Use dmy dates|date=July 2024}}
{{Use Indian English|date=September 2013}}
{{more citations needed|date=October 2016}}
The '''Satyam Computer Services scandal''' was India's largest corporate fraud until 2010. The founder and directors of [[India]]-based outsourcing company [[Satyam Computer Services]], falsified the accounts, inflated the share price, and stole large sums from the company. Much of this was invested in property. The swindle was discovered in late 2008 when the [[Hyderabad]] property market collapsed, leaving a trail back to Satyam.<ref name="ht">{{cite web|url=https://www.hindustantimes.com/business/satyam-scam-all-you-need-to-know-about-india-s-biggest-accounting-fraud/story-YTfHTZy9K6NvsW8PxIEEYL.html|title=Satyam scam: All you need to know about India's biggest accounting fraud|work=Hindustan Times |date=9 April 2015}}</ref>
The scandal was brought to light in 2009 when chairman Byrraju Ramalinga Raju confessed that the company's accounts had been falsified.<ref name=TheHinduSatyam />

== History ==

For many years Satyam accounts showed profits that had never existed, cash at the bank that did not exist, which inflated the share price. Raju and friends then sold shares. The accounts also showed $3m of "salary payments" to people who did not exist. These in fact went to board members. The falsified accounts were used to obtain cheap loans in the USA which were stolen by Raju and never entered into the accounts. Much of the money was squandered in real estate deals in Hyderabad. When the property market collapsed in 2008, the money vanished and whistle-blowers began to be heard. A failed attempt by Raju to use Satyam to buy a property company led to the scandal being uncovered.<ref name="ht"/>

===Initial confession and investigation===
On 7 January 2009, the chairman of Satyam, [[Byrraju Ramalinga Raju]], resigned, confessing that he had manipulated the accounts of [[Rupee|Rs]] 7,000 [[crore]] in several forms. The global corporate community was said to be shocked and scandalised.<ref name=TheHinduSatyam>{{cite news|url=https://www.thehindu.com/specials/timelines/satyam-scandal-who-what-and-when/article10818226.ece|title=Satyam Scandal: Who, what and when|first=Internet|last=Desk|newspaper=The Hindu|date=9 April 2015}}</ref>

In February 2010, the [[Central Bureau of Investigation|CBI]] took over the case and filed three partial charge sheets (dated 7 April 2009, 24 November 2009, and 7 January 2010), over the course of the year.<ref name=TheHinduSatyam /> All charges arising from the discovery phase were later merged into a single charge sheet.{{clarify|date=October 2016}}{{citation needed|date=October 2016}}

On 10 April 2015, [[Byrraju Ramalinga Raju]] was convicted with 10 other members.<ref>{{cite web|url=https://www.ndtv.com/india-news/satyam-fraud-verdict-in-6-year-old-case-likely-today-753451|title=Satyam Founder Ramalinga Raju, 9 Others Convicted of Multi-Crore Accounting Fraud|website=NDTV.com}}</ref>{{citation needed|date=October 2016}}

===Role of Auditors===
[[PricewaterhouseCoopers]] affiliates served as independent auditors of [[Satyam Computer Services]] when the report of scandal in the account books of Satyam Computer Services broke. The Indian arm of PwC was fined $6 million by the US SEC ([[U.S. Securities and Exchange Commission|US Securities and Exchange Commission]]) for not following the code of conduct and auditing standards in the performance of its duties related to the auditing of the accounts of Satyam Computer Services.<ref>{{cite web | url=https://www.sec.gov/news/press/2011/2011-82.htm | title=SEC Charges India-Based Affiliates of PWC for Role in Satyam Accounting Fraud | publisher=Securities and Exchange Commission | date=5 April 2011 | access-date=2013-04-27}}</ref> In 2018, SEBI ([[Securities and Exchange Board of India]]) barred Price Waterhouse from auditing any listed company in India for 2 years, saying that the firm was complicit with the main perpetrators of the Satyam fraud and did not comply with auditing standards. SEBI also ordered disgorgement of over Rs 13 crore wrongful gains from the firm and 2 partners. PwC announced their intent to get a stay order.<ref>{{cite web | url=http://www.hindustantimes.com/business-news/satyam-scam-all-you-need-to-know-about-the-case-against-price-waterhouse-and-sebi-decision/story-Ot1RbPuEyn6FoYVPQDxH9M.html | title=Sebi bars Price Waterhouse: What is the firm's role in the Satyam scam? | publisher=Securities and Exchange Commission | date=11 January 2018 | access-date=2018-01-18}}</ref>

=== Aftermath ===
"We are obviously shocked by the contents of the letter. The senior leaders of Satyam stand united in their commitment to customers, associates, suppliers and all shareholders. We have gathered together at Hyderabad to strategize the way forward in light of this startling revelation."<ref>{{Cite news|title=Shareholders interest top priority: Satyam Board|work=The livemint|url=https://www.livemint.com/Companies/MzIIT4hRaxQKLGaHjyNDPN/Shareholders-interest-top-priority-Satyam-Board.html}}</ref>

On 10 January 2009, the Company Law Board decided to bar the current board of Satyam from functioning and appoint 10 nominal directors. "The current board has failed to do what they are supposed to do. The credibility of the IT industry should not be allowed to suffer." said Corporate Affairs Minister Premchand Gupta. Chartered accountants regulator ICAI issued show-cause notice to Satyam's auditor [[PricewaterhouseCoopers]] (PwC) on the accounts fudging. ICAI President Ved Jain said: "We have asked PwC to reply within 21 days."{{citation needed|date=October 2016}}

Also on 10 January 2009, the same day, the [[Crime Investigation Department (India)|Crime Investigation Department]] (CID) team picked up Vadlamani Srinivas, Satyam's then-CFO, for questioning. He was arrested later and kept in [[judicial custody]].<ref>{{cite news | url=http://economictimes.indiatimes.com/articleshow/3964323.cms | title=Satyam ex-CFO Vadlamani Srinivas sent to judicial custody till 23 Jan | newspaper=The Economic Times | date=11 January 2009 | access-date=2015-12-19}}</ref>

On 11 January 2009, the government nominated noted banker [[Deepak Parekh]], former [[NASSCOM]] chief [[Kiran Karnik]], and former SEBI member C Achuthan to Satyam's board.<ref>{{Cite news|date=11 January 2009|title=Govt puts Parekh, Karnik and ex-Sebi member on Satyam Board|work=The livemint|url=https://www.livemint.com/Home-Page/msKAAIfJ5PGY6ikIt5XjgI/Govt-puts-Parekh-Karnik-and-exSebi-member-on-Satyam-Board.html}}</ref>

Analysts in India have termed the Satyam scandal India's own [[Enron scandal]].<ref>[https://archive.today/20120905214323/http://www.msnbc.msn.com/id/28539007/ Satyam scandal could be 'India's Enron'] – World business- msnbc.com (updated 11:42 a.m. ET 7 January 2009)</ref> Some social commentators see it more as a part of a broader problem relating to India's family-owned corporate environment.<ref>[http://kafila.org/2009/02/13/the-caste-of-a-scam-a-thousand-satyams-in-the-making/ The Caste of a Scam: A Thousand Satyams in the Making]. Kafila.</ref>

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|date=January 2009}} It was also reported that 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.<ref name="Reuters08Jan2009-PwC">[https://web.archive.org/web/20090126041000/http://in.reuters.com/article/companyNews/idINHKG30879120090108 Satyam scandal rattles confidence in accounting Big Four]. In.reuters.com.</ref><ref name="ICAI-PwC-explanation">[http://www.livemint.com/2009/01/07165018/ICAI-to-seek-explanation-from.html ICAI to seek explanation from Satyam’s auditor PwC]. Livemint.com (7 January 2009).</ref><ref name="PwC-Satyam-explanation">[https://www.reuters.com/article/marketsNews/idINBMA00213420090107?rpc=44 Satyam auditor says examining chairman's statement]. Reuters.com (7 January 2009).</ref><ref name="VCCircle-PwC-Satyam-explanation">{{Cite web|url=http://www.vccircle.com/500/news/what-happens-pwc-the-auditor-for-satyam|title=What happens to PWC, The Auditor For Satyam?}}</ref><ref name="Rediff-PwC-Satyam-">[http://www.rediff.com/money/2009/jan/07satyam-satyam-auditors-body-to-pull-up-pwc.htm Satyam: Auditors' body to pull up PwC ICAI to seek explanation from Satyam’s auditor PwC]. Rediff.com.</ref> Satyam was the 2008 winner of the coveted Golden Peacock Award for Corporate Governance under Risk Management and Compliance Issues,<ref>{{Cite web| title=Golden Peacock National Training Award - 2008 | url=http://www.goldenpeacockawards.com/GPA_RESULTS_ANNOUNCEMENT_2008.pdf | archive-url=https://web.archive.org/web/20090305000056/http://www.goldenpeacockawards.com/GPA_RESULTS_ANNOUNCEMENT_2008.pdf | archive-date=2009-03-05}}</ref> which was stripped from them in the aftermath of the scandal.<ref>[http://economictimes.indiatimes.com/Infotech/Software/Satyam_stripped_off_Golden_Peacock_Global_Award/articleshow/3949334.cms Satyam stripped off Golden Peacock Global Awards] – Software-Infotech-The Economic Times (8 Jan 2009, 0118 hrs IST, PTI)</ref> The [[New York Stock Exchange]] has halted trading in Satyam stock as of 7 January 2009.<ref>[https://web.archive.org/web/20090208225833/http://sify.com/finance/fullstory.php?id=14832532&?vsv=TopHP1 NYSE halts trading in Satyam stock] – (Wednesday, 7 January 2009, 23:02) Sify.com</ref> India's [[National Stock Exchange of India|National Stock Exchange]] has announced that it will remove Satyam from its S&P CNX Nifty 50-share index on 12 January.<ref>{{Cite web|url=https://www.reuters.com/finance/stocks/keyDevelopments?symbol=SAY.N&timestamp=20090107142400&rpc=66|archiveurl=https://web.archive.org/web/20090224005555/https://www.reuters.com/finance/stocks/keyDevelopments?symbol=SAY.N&timestamp=20090107142400&rpc=66|url-status=dead |title=Satyam Computer Services Ltd (SAY.N) Key Developments (Stocks) Reuters.com| website=[[Reuters]] |archivedate=24 February 2009}}</ref> The founder of Satyam was arrested two days after he admitted to falsifying the firm's accounts. [[Ramalinga Raju]] was charged with several offences, including criminal conspiracy, breach of trust, and forgery.{{citation needed|date=October 2016}}

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.<ref>[http://news.bbc.co.uk/2/hi/business/7821087.stm Indian IT scandal boss arrested] – 9 January 2009 – Business – BBC NEWS</ref> On the [[NYSE|New York Stock Exchange]], Satyam shares peaked in 2008 at US$29.10. By March 2009, they were trading around US$1.80.<ref>https://www.catusharmakkar.com/blog/the-satyam-scandal-unveiling-india-s-largest-corporate-fraud</ref>

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

On 14 January 2009, Price Waterhouse, the Indian division of [[PricewaterhouseCoopers]], announced that its reliance on potentially false information provided by the management of Satyam may have rendered its audit reports "inaccurate and unreliable".<ref>{{Cite news |last=Kinetz |first=Erika |date=14 January 2009 |title=Price Waterhouse says its Satyam audits relied on company information, could be wrong |work=Associated Press Newswires |location=MUMBAI, India |url=https://global.factiva.com/redir/default.aspx?p=sa&NS=16&AID=9UNI005200&an=APRS000020090114e51e0013x&drn=drn:archive.newsarticle.APRS000020090114e51e0013x&cat=a&ep=asi |id=APRS000020090114e51e0013x |via=Dow Jones Factiva}}</ref>

On 22 January 2009, CID told in court that the actual number of employees is only 40,000 and not 53,000 as reported earlier and that Mr. Raju had been allegedly withdrawing {{INRConvert|200|m|0}} every month for paying these 13,000 non-existent employees.<ref>[http://timesofindia.indiatimes.com/India_Business/Satyam_fudged_FDs_has_40000_employees_Public_prosecutor/articleshow/4015830.cms Satyam fudged FDs, has 40,000 employees: Public prosecutor]. ''The Times of India''.</ref>

The Indian government designated A. S. Murthy to become the new CEO of Satyam effective 5 February 2009. Special advisors were also appointed, Homi Khusrokhan of [[Tata Chemicals]] and Chartered Accountant [[T. N. Manoharan]].<ref>{{cite web|url=https://www.indiainfoline.com/|title=Share/Stock Market Investment, Financial & Share Market News, Mutual Funds & BSE/NSE Live Index Updates – IndiaInfoline|website=indiainfoline.com}}</ref><ref>[https://www.bloomberg.com/apps/news?pid=20601091&sid=aTQj1hK_OeXA&refer=india Satyam Names Murty as CEO to Replace Arrested Founder] – (5 February 2009, 1813 hrs IST) Satyam Names Murty as CEO to Replace Arrested Founder</ref><ref>[http://www.moneycontrol.com/india/news/business/as-murty-appointed-as-satyam-ceo/384024 A S Murty appointed as Satyam CEO] – (5 Feb 2009, 1816 hrs IST) A S Murty appointed as Satyam CEO Kiran</ref>

On 4 November 2011, the Supreme Court granted bail to Ramalinga Raju, as well as two others accused in the scandal, since the investigation agency CBI had failed to file a charge sheet, despite having already had 33 months (from the time of Raju's arrest) to do so.{{citation needed|date=October 2016}}

On 15 September 2014, the special CBI court hearing the case asked the concerned parties to appear before the court on 27 October 2014. Date of judgement was to have been indicated later on that day.{{citation needed|date=October 2016}}

On 9 April 2015, Raju and nine others were found guilty of collaborating to inflate the company's revenue, falsifying accounts and income tax returns, and fabricating invoices, among other findings, and sentenced to seven years imprisonment by Hyderabad court. Kunjumani and his brother were also fined by the court 55 million rupees (US$883,960) each.<ref>Retrieved from http://www.financialexpress.com/article/industry/companies/satyam-computer-case-b-ramalinga-raju-9-others-found-guilty/62062/.</ref>

==Acquisition of Satyam by Mahindra Group==
On 13 April 2009, via a formal [[public auction]] process, a 31% stake in Satyam was purchased by Mahindra & Mahindra owned 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<ref>[http://www.moneycontrol.com/news/business/mah-satyam-tech-mahindra-merger-may-be-delayed_522887.html moneycontrol.com]. moneycontrol.com (15 February 2011).</ref><ref>[http://www.moneycontrol.com/news/business/mah-satyam-tech-mah-to-appoint-bankers-to-fasten-merger_581330.html Mah Satyam-Tech Mah to appoint bankers to fasten merger]. Moneycontrol.com (30 August 2011).</ref> [[Tech Mahindra]] announced its [[Tech Mahindra-Mahindra Satyam merger|merger]] with Mahindra Satyam on 21 March 2012, after the board of two companies gave the approval.<ref>[http://www.livemint.com/2012/03/21094345/Tech-Mahindra-Satyam-get-nod.html /Tech Mahindra, Satyam get nod to merge]. Livemint.com (21 March 2012).</ref><ref>[http://profit.ndtv.com/News/Article/high-court-orders-shareholders-meeting-on-msat-tech-mahindra-merger-304000/ High Court orders shareholders' meeting on MSat-Tech Mahindra merger]. Profit.ndtv.com (11 May 2012).</ref> The companies merged legally on 25 June 2013.<ref>[https://archive.today/20130825104834/http://articles.economictimes.indiatimes.com/2013-06-26/news/40187424_1_satyam-merger-government-mediated-auction-tech-mahindra Tech Mahindra completes Satyam merger, becomes 5th biggest IT firm – Economic Times]. ''The Economic Times''. (26 June 2013).</ref><ref>[http://www.thehindubusinessline.com/industry-and-economy/info-tech/satyam-is-history-merger-with-tech-mahindra-complete/article4848975.ece Satyam is history, merger with Tech Mahindra complete | Business Line]. ''Business Line''. (25 June 2013).</ref>

==See also==
*[[Satyam Computer Services]]
*[[Tech Mahindra]]
*[[National Financial Reporting Authority]] (NFRA)
*[[1992 Indian stock market scam]]
*[[NSE co-location scam]]

==References==
{{reflist}}

==External links==
*[http://www.hindu.com/nic/satyam-chairman-statement.pdf Satyam Chairman B. Ramalinga Raju's statement to the Board] {{Webarchive|url=https://web.archive.org/web/20090304082738/http://www.hindu.com/nic/satyam-chairman-statement.pdf |date=4 March 2009 }}
*[https://www.independent.co.uk/news/business/news/pricewaterhousecoopers-offices-searched-in-satyam-probe-1334267.html PricewaterhouseCoopers offices searched in Satyam probe]

{{Alleged scams in India}}
{{2008 economic crisis}}
{{Scams and confidence tricks}}
{{Corporate scandals}}

[[Category:21st-century scandals]]
[[Category:2000s in economic history]]
[[Category:2010s in economic history]]
[[Category:2008 in economic history]]
[[Category:2010 in India]]
[[Category:2009 in India]]
[[Category:2008 in India]]
[[Category:2008 scandals]]
[[Category:2009 scandals]]
[[Category:2010 scandals]]
[[Category:Accounting scandals]]
[[Category:Corporate crime]]
[[Category:Fraud in India]]
[[Category:Accounting in India]]
[[Category:History of Andhra Pradesh (1947–2014)]]
[[Category:Corruption in India]]
[[Category:Crime in Andhra Pradesh]]
[[Category:Finance fraud]]
[[Category:Scandals in India]]
[[Category:Pump and dump schemes]]
[[Category:Corporate governance in India]]

Satyam scandal - Revision history

imported>VedikaB30: /* Aftermath */