Report: Fraud and deception at Satyam was deep

Report: Fraud and deception at Satyam was deep

Summary: The fraud and deception at Satyam Computer Services in India was so in-depth that it included dual accounting books, thousands of forged invoices, thousands of unnecessary employees and dozens of fake bank statements, according to court records analyzed by the New York Times.Through the deception, managers, auditors and an adviser were able to create a perception that the company was "carrying out huge volumes of business" so it attract potential customers and investors, according to the NYT.

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The fraud and deception at Satyam Computer Services in India was so in-depth that it included dual accounting books, thousands of forged invoices, thousands of unnecessary employees and dozens of fake bank statements, according to court records analyzed by the New York Times.

Through the deception, managers, auditors and an adviser were able to create a perception that the company was "carrying out huge volumes of business" so it attract potential customers and investors, according to the NYT. All the while, cash was flowing into the hands of those who architected the deception.

In January, Satyam co-founder B Ramalinga Raju resigned from the company - India's fourth largest outsourcing company - after admitting that this was an estimated $1 billion cash hole in the company's balance sheet. Within days, Raju's brother and company co-founder Rama Raju had been arrested, as well, and the company's full board of directors were let go.

In addition, the company's auditors are also facing charges. The Times, quoting from the court documents, reports:

The company’s auditors, S. Gopala Krishnan and Srinivas Talluri, who have been suspended from PricewaterhouseCoopers, both received figures from Satyam’s banks that were in “great variance with the figures provided by the management” but certified Satyam’s accounts anyway, the bureau said. In return, the bureau claims, the auditors received an “exorbitant audit fee” over and above the market rate.

Earlier this month, Satyam was sold to Venturebay Consultants, a subsidiary of Indian outsourcing firm Tech Mahindra. Venturebay Consultamts will pay $352 million for new shares representing a 31 percent stake in Satyam. From there, Satyam will make a public offer to buy another 20 percent of shares to reach a 51 percent controlling stake.

Topics: Outsourcing, Banking, CXO, Enterprise Software, Legal

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11 comments
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  • RE; Fraud at Satyam

    The depth of this coverup/conspirecy is staggering. It may have gone all the way to the janitorial service. I would be reluctant to invest in this atmosphere.
    Col Mustard
  • RE: Report: Fraud and deception at Satyam was deep

    Why to blame co-founder Ramalingaraju for Satyam Fraud when the watchdogs (auditors) with their eyes wide open allowed the wolf to eat the full cattle of sheep on getting its share of the feast?

    Auditors are considered as the watchdogs to safeguard the interest of the investors. But, when the greedy auditors forgetting their ethical, social and accounting responsibilities share the booty with the Directors keeping aside the ethics of Corporate Governance, they should be dealt with strong iron hands. Suspension of two auditors cannot heal the wounds of the investors in general unless they are banned permanently from practice by the Institute of Chartered Accountants of India and other world bodies. Some pertinent questions arise that need to be pondered very seriously ?

    1) If the world renowned PWC cannot discharge its functions properly who else can be relied by gullible investors?

    2) Was the PWC sleeping over the nefarious activities of its members whom the responsibility of audit of Satyam was entrusted?

    3) Don?t the PWC have any foolproof system to keep watch over wrongs done by its auditor members/ employees?

    4) Is the PWC working just as a commission agent or lending its name for huge amounts to do any type of money laundering business?

    In fact the crime on the part of the PWC is of very serious and unpardonable nature. The PWC itself needs to be permanently banned from doing audit business the world over. Besides the PWC should be made responsible to recoup the loss of investor money due to its unethical functioning through its member auditors.

    P S Dhingra
    Vigilance & Change Management Consultant
    psd1941
    • PWC...

      P S Dhingra, I totally agree with you. Remember that this was not the first time PWC is caught in such kind of fraud event. They should improve their controls over the auditors who works for them.
      G.Lacombe
      georgeslacombe9
    • The good times

      Unfortunately when the cash is rolling in like water flowing down a stream, too many people are willing to look the other way. Those that do raise questions are often quickly silenced in an attempt to prevent them from turning off the money spigot.
      the.ksmm
    • PWC

      If I were a stockholder of a company that has PWC as their auditor, then I would demand that PWC be fired immediately!

      If the board refuses to fire PWC, then firing the board is certainly in order.

      Barring that, I would just get rid of my stock. IMHO, PWC has NO creditability, period.

      The stockholders of Satyam have every right to sue PWC into oblivion; and they SHOULD!
      fatman65535
  • Typical Overseas Outsourcer

    Typical Overseas Outsourcer, probably cooked the books on bids to show that zillions could be saved by using them to shitcan American jobs.

    Keep chasing shareholder value ... and you too can be holding the bag on the next Satyam / Enron / AIG whomever.
    Too Old For IT
  • RE: Report: Fraud and deception at Satyam was deep

    Fraud and deception are the way of life in the subcontinent and the surrounding region, so nobody should be surprised.
    gerald.branigan
    • Generalization is a good thing

      Absolutely Gerald,

      Thankfully fraud and deception doesn't exist in Europe or America. Its definitely a sub-continent thing. I guess the whole sub-prime mortgage crisis, which is an order of magnitude greater in terms of the amount of money involved than Satyam must have somehow started on the sub-continent.
      kj2757
  • PWC is the cook behind this foul issue

    Some body has to do something about this bad people. They had made all the people fools, who placed their hard earned money to buy these peoples share. Merciless, merciless.
    digish777
  • RE: Report: Fraud and deception at Satyam was deep

    I am sorry, this is not true. I guess you have not worked in subcontinent neither you know anything about India. Also what about the frauds that happen in US. why is US economy is down the drain right now. Is that not fraud. Is it not fraud to overvalue the complete sharemarket. What about CEOs taking billions of dollors home while US economy is struggling. Is that not fraud. Common Wake Up Or It will Be Too Late
    gagan.sethi
  • RE: Report: Fraud and deception at Satyam was deep

    I strongly feel that all the assets of these fraudsters from AIG, Satyam, Fanny May, Freddie Mac (http://www.huffingtonpost.com/tag/fanny-may) must be confiscated, even if they have registered it under their spouse's and children's names. After all it was Fanny May & Freddie Mac who caused this worldwide economic meltdown and thopusands of honest people lost their houses and life savings. Take their money and return it to the victims of these fraudsters. Also the government should bail out the victims and not the fraudsters!!!
    kenaaa7