Fraud at Satyam-III
A. The Government and the Regulators should do a professional job of getting to the very bottom of the frauds committed by Mr Raju and his team in Satyam. One should see a quick dispensation of justice in terms of Satyam fraud vis-À-vis Mr Raju, his CFO and other senior members of the operating team, Mr Raju's co-Directors and of course, Satyam's infamous auditors. The linkage between Satyam and Mr Raju's other companies and especially, MAYTAS, which has been offered a 'most preferred company' status by the AP Government would need to be clearly established, vis-À-vis the transfer of funds, directly or indirectly. It is reported that Mr Raju and his family owns about 6000 acres of land in AP and Karnataka. How did Mr Raju come to own this and how did and his children go about funding the acquisition of such a vast quantum of real estate, needs to be probed. (It is interesting to note that when Mr E Sreedharan accused the AP Government of going out of its way to accommodate MAYTAS, in respect of the contract for the metro rail project, the CM threatened to file a defamation suit against Mr Sreedharan. It seems that Mr Sreedharan, was, afterall, right about MAYTAS).
B. There are enough provisions under the Indian criminal system to deal with the current issue and one hopes that the wrong doers in this case are convicted fast. The AP Police have already listed out several sections of the IPC in the FIR filed against Mr Raju. The Minister for Company Affairs, Mr Prem Chand Gupta, has taken the right step of dissolving Satyam's existing Board and deciding to replace it with a new team comprising amongst others, people of the like of Deepak Parekh and Kiran Karnik. But, we must bear in mind that sentencing Mr Raju and the other offenders would by itself, do no good to Satyam's employees and other stakeholders and the newly constituted Board should immediately get into the most important assignment of bringing back some sense of confidence amongst Satyam's employees and customers.
C. Lastly and most importantly, we must bear in mind that Satyam is not only an Indian Company but also a Company which is listed on a US Stock Exchange also. To investigate this fraud is as important from the international investors' perspective, as it is, from the point of view of the Indian stakeholders. It is as much as it is, about the Indian GAAP as it is, about the US GAAP, as Satyam is required to report in US GAAP also, not to talk of the implications arising of the Sarbnanes Oxley Act, which applies to Satyam. Any negative views about the accounting scandal will definitely affect other companies listed in the US bourses and we must ensure that we deal with the Satyam fiasco, firmly, quickly and fairly. Class suits have already been filed in the US against Satyam and Mr Raju. It is not that there are no accounting scandals in the US or any other country. We can see the judicial system rendering justice in a few years' time in the US and the stern punishment given to the offenders (as is the case in Enron and Worldcom) often acts a deterrent for others. In India, of course, we have not seen the guilty punished even in respect of companies which vanished after taking money from the public thro' IPOs, several years back.
D. The AP Government has finally acted, albeit, after a delay of about 60 hours, in arresting Mr Raju and his brother, apart from Satyam's CFO (some say, Mr Raju had 'surrendered'). There is already a lot of rumours about Raju's proximity to the AP politicians. Moreover, I am not sure if AP's CID Wing would have the requisite knowledge of handling an accounting fraud of this magnitude. It would be a good idea, considering the allegations of proximity between Mr Raju and some of the AP politicians, as aforesaid, to hand over the probe to the CBI, which in my view, can do a better job.
E. And lastly, while we discuss about punishing Mr Raju and Co. for their misdeeds, we must not forget that Satyam, as a company, represents one of India's great success stories. As a nation, we must remember that the people who trusted satyam, including its world wide customers, have in fact, trusted India's capability. The government and the Indian Financial Institutions including LIC of India should immediately work out a financial bail out plan for Satyam which could include the possibility of it being merged with an existing it major. We should not confuse the misdeeds of Ramalinga Raju with Satyam, as a Company. There is nothing wrong in Satyam's business model or in its customers or in respect of most of its employees. If the us can work out a bail out package for its troubled companies, why shouldn't we, for a company, which till last week, was a darling of its stakeholders and investors and which was the country's pride. I hope that Satyam's new board would get into business immediately and address the issue of rusticating Satyam.
F. And very very lastly, .. if 26/11 is to be remembered for the terrorist attack on mumbai…. is 07/01 to be remembered for the financial terrorism that our own Ramalinga Raju committed on his fellow men?