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 Satyam Computers was founded in 1987.

 It was converted into Public Ltd Co. in 1992.


 The company offers consulting and
information technology services spanning
various sectors.
 Mahindra Satyam was overall ranked #153
by Fortune India 500 in 2011.
 Satyam's network covers 66 countries and
53000 employees across six continents. It is
listed in BSE, NSE, NYSE
 India’s 4th biggest software company.
 B. Ramalinga Raju was
born on Sept 16,
1954. A traditional
agricultural family of
the KSHATRIYA (RAJU)
Community of Andhra
Pradesh.
 He founded Satyam
Computers and was
its Chairman until
January 7, 2009 when
he resigned from the
Satyam board after
admitting to corporate
fraud.
 Ranked Among India’s Top 10 Best Employers, 2004 and 2003
 Top 13 Best-Managed Companies in India.
 Corporate Citizen award for Corporate Social Responsibility.
 2007:- Becomes the 1st Asian company to features in the training
magazine’s list of top 125 companies for learning,
 2008:-won corporate governance (including Golden Global Award
twice) Top-50 Marketers Award, under the Resurgent Marketers
category for 2010 by Pitch India First IT Company in the World
Certified under ISO9001:2000
 SAP Pinnacle Award 2008.
 United Kingdom Trade and Investment India Business Award
 2011:-Mahindra Satyam BPO honoured as “India’s Most Customer-
Responsive BPO Company” AGC Networks The Economic Times, Ernst
& Young and Nielsen. And the list goes on…
A total of 650+ Clients
185 of the top fortune
500 Companies
Ramalinga Raju : Satyam former chairman

B Rama Raju : Brother of Ramalinga Raju


Former Managing Director

V Srinivas : Ex-Chief financial officer

S Gopalakrishnan: Price Waterhouse Auditor

Talluri Srinivas : Price Waterhouse Auditor


 Raju and his brother, B Rama Raju, were arrested
by the Andhra Pradesh police on charges of breach
of trust, conspiracy, cheating, falsification of
records.
 Raju has mislead various investors.

 Raju had also used dummy accounts to trade in


Satyam's shares.
 He has violated the insider trading norm.

 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 INR 20 crore
rupees every month for paying these 13,000 non-
existent employees.
 Raju wanted to take over his MAYTAS INFRA and
MAYTAS PROPERTIES(company of his sons).
He was blamed that he was using the funds of the
investors for the family business.
 Satyam Computers had on December 16,2008,
announced that it will acquire two group firms
 Maytas properties

 Maytas Infra

 The Board Of Directors of Satyam had approved the


founder’s proposal to buy 51 per cent stake in
Maytas Infrastructure and 100 % in Maytas Properties
 The total outflow for both the
acquisitions was expected to be US$
1.6 bn comprising of US$ 1.3 bn for
the 100% stake in Maytas Properties
and US$ 0.3 bn for the 51% stake in
Maytas Infra.
 This is the move that sparked a row
over alleged violation of corporate
governance laws.
 This deal is not profitable for investors
.So after this announcement they
started to raise their voices against the
deal
 Its financial statements for years were
totally false, cooked up
 The Balance sheet as of September 30,
2008 showed-Inflated (non-existent) cash
and bank balances of Rs. 5040 crore (as
against Rs. 5312 crore reflected in the
books)
 An accrued interest of Rs. 376 crore which
is non-existent.
 An understated liability of Rs.1230 crore on
account of funds arranged by BR RAJU.
 The Debtors were overstated by 400
millions plus.
‘Creative Account Practice’

 Details of cash balances with Scheduled banks are not


there in the Annual report
Understated
Liabilities Fraud Amount
Overstated cash
balances, Income
receivables
IPC SECTION 120B
•For criminal conspiracy

IPC SECTION 409


•Criminal breach of trust

IPC SECTION 420


•Cheating

IPC SECTION 468


•Forgery

IPC SECTION 471


•Falsification of records

SEBI INSIDER TRADING NORMS

CLASS ACTION SUITS IN US


PRESSURE TO MEET Growing Competition
EXPECTATION Threat of being overtaken

OVERCONFIDENCE On his ability

Siphoning of funds
PERSONAL BENEFITS Salary of non-existent 13000
employees

“Since about seven years we wanted to show more income in the


accounts to avoid others from involving in the company affairs and
any possible hostile acquisition.”
•Promoters held a small portion of equity
SMALL •Created an image of charismatic leaders

HOLDINGS OD by showing falsified success


•Had unquestionable control over the
THE PROMOTERS company

•Failed the prime duty of oversight


FAILURE OF THE •Board of directors composed mainly of

BOARD OF independent directors yet failed to notice


the scam cooking in the company
DIRECTORS •Ignorance didn’t lead to bliss in their case
•Failed to act on a whistle blower’s expose.
FAILURE OF •The mail by an alias exposing the scam
was forwarded to the auditors
AUDIT •The auditor accused the contents of the

COMMITTEE mail to be false and assured of a detail


reply on 29th Dec, however the meeting
never took place.

NON
•Mr. Raju had pledged mist of his
DISCLOSURE OF promoter’s shares to borrow funds.
•Mr. Raju’s share declined from 8.74% in
THE PLEDGING 2008 to 3.6% in 2009

PROMOTER’S •The shareholders had no clue of the


decline in the stake of the promoters.

SHARE
Stock Market Share - Holders Indian Economy

Employees Stake - Holders


 SUPER USER LOG IN- Senior management allowed
employees to log in to billing system by providing
passwords.
 FAKE INVOICES – employees logged in to billing
system and created false invoices on instruction of
senior management.
 BOOST REVENUE AND PROFITS – fake invoices were
used to show higher profits amounting to $1.1Billion.
 FALSIFIED BANK STATEMENTS- Showed false cash
receipts.
 FALSIFIED INCOME EARNED FROM DEPOSIT- in order
to justify higher cash showed false interest to
complete the circle of fraud.
C.P. Gurnani Milind Kulkarni
C.E.O. of Tech C.F.O. of Tech
Mahindra Mahindra
 Introduction of new rules by the stock market
regulator, making it compulsory for promoters of
companies to disclose the percentage of shares
pledged by them to lenders.

 Appointment of Independent Auditors and


Company Secretary by Company Law Board to
conduct Audit of any private organization and
time.

 Set-up of 5 member Committee to suggest how


to implement effective compliance and Corporate
Governance in private sector by CLB.
Conclusion
More scandals like Satyam can be
avoided if-
1.If auditing firm is honest.
~ Must not rely on management completely
~ Must conduct physical checks
~ Must confirm balances in various accounts
~ Contact banks and costumers directly for matching
balances
2.SEBI plays an active role.
~ Stringent corporate governance laws
~ Accurate review of financial reports
3. Periodic review of legal compliance reports by
independent directors.