India's biggest corporate fraud investigation underway
In India’s allegedly biggest-ever case of corporate fraud Satyam Computer Service Ltd. founder Ramalinga Raju and his brother Rama face charges of “criminal conspiracy and breach of trust in an alleged $1 billion [734 million] fraud,".
The scandal broke when Raju confessed to “filling the company’s balance sheets with “fictitious” assets and “nonexistent” cash in an extraordinary letter to the company’s board,”.
Raju said that he had “falsified accounts for “several years” to stave off a takeover, however, accounting experts can’t explain how the reporting error went unnoticed.
“Satyam’s shares plummeted on the news by 75%, dragging down India’s stock main market by 7%.”
“Officials have seized documents and the nation’s accounting body is examining auditor PricewaterhouseCoopers LLC’s local unit,”.
In a bid to minimise the fall-out from the scandal, the Indian government appointed Deepak Parekh, chairman of HDFC Bank; Kiran Karnik, a former president of the National Association of Software Services Companies outsourcing industry body; and C.Achuthan, director of the National Stock Exchange and formerly of the Securities and Exchange Board of India, to the company’s board on 11 January.
Corporate Affairs Minister Prem Chand Gupta called the Satyam case “an aberration,” urging that the “credibility of the Indian corporate sector in general, and IT sector in particular, should not be allowed to suffer because of this,".
Many analysts say that the “chase for huge profits, and the desire to keep up with the break-neck speed of India’s $50 bn outsourcing industry’s growth rates that may have been behind Mr Raju’s motivation in fudging the accounts at his firm,” writes the BBC.