Posted by: qmaxim | February 4, 2009

Satyam fraud saga – the real story

It is now more than a month since Ramalinga Raju (RR) made his stunning
announcement of cheating to the tune of 1 Billion dollars. Every day, newspapers and electronic media come out with new revelations , “ exclusive scoops” & plants by various vested interests.

In most cases, these stories are promptly contradicted very next day by other sources like CID, RR’s lawyers, Central govt., Andra govt. , SEBI,SFO, income tax dept. etc.
In this din of news stories, sound bites and planted stories certain core issues are getting ignored deliberately or otherwise.
Consider these:

Though RR turned out be a fraudster, there is no doubt that he has built a billion dollar enterprise capable of delivering high quality products and services. According to data available, Satyam was 3rd largest Indian software exporter with turnover close to 2 billion dollars and a Indian success story. There is no doubt about quality of output or that of its many people. Otherwise, Satyam won’t be winning orders from Fortune 500 clients (like GE) and managing to retain them for so many years.

It is now more than a month still agencies (like SEBI) who have competency to unravel the accounting fraud have not got around to interviewing RR. (only today SEBI has got clearance). It is pretty clear that agencies like CID simply don’t have competency to investigate. Govt. could have easily decided as to which agencies should have priority in interrogating RR. From this it is obvious that RR has powerful political backers who are in cohorts with him. During this delay, most of the evidence would have been destroyed.

The foreign “auditors” PwC have been certifying the company for 8 years – they are being treated with kid gloves.

After taking prompt action to dissolve the board of the company, central govt. appears to have lost its way. Minister Gupta appears to have missed out on important point that Satyam is not a public sector undertaking. Also, it appears that he does not the seem to realize that govt.’s primary task is to protect the interest of share holders (who are in India and US), customers (who are mostly outside the country), employees (many of them seem to be of good quality) and ensure this type of fraud does not happen again.
Instead, govt.’s primary focus appears to be selling off the company as quickly as possible, and for a song. This will help to protect lot of vested interests and prevent skeletons tumbling out of cupboard.
Second priority appears to be appeasing foreign share holders. In the process, keeping Satyam as an independent company, protecting interest of Indian share holders & protecting jobs of employees appear to be least of govt.’s concerns.
Consider these:
 When RR made his infamous announcement, share price crashed to as low as Rs 6.5 /share from original quote of 180. Critical question to ask is why did the circuit breaker of the stock exchange not kick in and stop the trading? It appears that stock price was deliberately brought down so that valuable company can be had for a song.

 No information has been made public as to extent of hole in the balance sheet even now. Why should it take so long when all the transactions are electronic?

 SEBI seems to be in hurry to change the rules of takeover; It is actively considering changing purchase price to be paid to average of only 2 weeks’ quoted price from six months at present.
 Since govt.’s intention to sell has been made public that too at throwaway price, there is a deluge of people ready to buy the company in as is where is condition. Why are all these guys lining up? Simple. They have realized that it is a bargain in the offing. Most of them have no competency to run an IT company, some of them have even dubious track record running companies to ground. Some are even suggesting / considering e-auction as if it is cattle feed one is buying/ selling.
 Also, large number of people have thrown their hat in the ring to become CEO and CFO.

Even I am considering making a bid!!

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