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Satyam saga: SWITCH to WITCH to ITCH

By <b>P V Harikrishnan</b>
Google Oneindia News

When it comes to IT companies, most analysts and media reports in India speak about only Infosys, Wipro, HCL and Satyam. There is another prominent company which gets excluded often - that is Cognizant, as Cognizant is based out of US and not in India. Gartner came up with the jargon SWITCH - Satyam, Wipro, Infosys, TCS, Cognizant and HCL Technologies. All analysts started using the term SWITCH in their forecasts. Now that Satyam is in trouble will it be WITCH? Jokes are floating around about WIPRO dropping out from IT and WITCH becoming ITCH.

Raju is a well connected man in India. It would be interesting to see if law catches up with him. Even if he escapes in India, what about the SEC the federal agency that oversees the exchange of securities to protect investors in US? However US also is not free of corporate scandals. Enron, the recent Madoff $50B scandal are best examples for this. Will the US lawyers RUSH on behalf of Satyam shareholders to sue Raju?

How did the auditor sign the balance sheet? Will that audit firm Price Waterhouse in India be asked to shut? Is this a sign or a sample case, how (are) the highly honoured audit firms are working in India? Whether it is a haunting WITCH or an ITCHing sensation we have to identify the companies where "Fair is foul, and foul is fair". The word 'Satyam' in many Indian languages means 'Truth'. Unfortunately that is the name of this company where every corporate act was false. Ramalinga Raju the Chairman of Satyam Computers decided to buy out 'Maytas" which is his son"s ailing infrastructure company. Problem started after that.

With this move, Raju destroyed the image of India as an attractive investment destination and paradigms of corporate governance. Initial reports say that Ramalinga Raju may face criminal proceeding and 10 year jail term. The finance ministry has swung into action on the Satyam issue. It has asked stock market regulator Securities and Exchange Board of India (SEBI) and Ministry of corporate affairs to give a report on the issue.

Defining the financial fraudulence as an event of 'horrifying event', market regulator SEBI on Wednesday, Jan 7 said it would take all steps under the law for which it has started discussions with government and bourses.

"We are in touch with Ministry of Corporate Affairs... we are also in discussion with them as to what steps need to be taken from the perspective of power they have under the law and SEBI has under the law," SEBI Chairman C B Bhave said. The National Association of Software and Service Companies (Nasscom) may look at banning Satyam Computer Services from its membership. "The entire incident came AS a shock to us. Also, this kind of a fiasco is an unprecedented one in the history of Nasscom.

We are looking into the matter on what steps can be taken. Considering the magnitude and implications of the incident, we can even look at banning the company from Nasscom,'' said Ganesh Natarajan, Chairman of Nasscom.

These are the initial responses from Government bodies and the leading Industry Association. But how far will it go? Will Raju be tried and scentenced for giving misinformation to the share holders? Wait and see which senior counsel from Supreme Court is going to defend the case of Raju. Will Government ban the operations of foreign auditing firm Price Waterhouse in India?

Between Dec 23 and Jan 5, Infrastructure Leasing and Financial Services (IL and FS) sold shares of Satyam computers which were mortgaged by Satyam Promoters. The sold shares represent around 3.66 per cent of Satyam's total equity.This happened just before Raju"s revelations and resignation. Satyam"s stock was hovering around RS150 for the last two weeks. After the revelations by Raju on Wednesday, Jan 7 the stock price plunged to the levels of Rs 40. Can IL and FS"s trade be termed as an act after insider information?

Will SEBI look into this? There are many questions yet to be answered.

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