Brothers Ramaling and Rama Raju, former chairman and former managing director and CEO, respectively, of Satyam Computer Services have been arrested and the company's full board of directors has been let go as authorities in India begin their investigations of an alleged $1 billion fraud, according to Bloomberg. Corporate Affairs Minister Prem Chad Gupta told reporters:
The developments so far indicate that the current board of Satyam has failed to do what it was supposed to do. The government is committed to punish everyone found guilty, including the auditors.
At a press conference in Hyderabad, the city where the company is based, authorities said the brothers have been detained on charges that include forgery, breach of trust and criminal conspiracy. Officials also have seized documents and the nation’s accounting body is investigating auditor PricewaterhouseCoopers LLC’s local unit. The brothers will appear before a magistrate within 24 hours but are not eligible for bail, officials said. Their offenses carry a maximum sentence of 10 years.
In a statement, the company said that it welcomed the government's intention to appoint 10 nominees to replace the current board as a way "to ensure uninterrupted operations and restore the confidence of all employees, customers and shareholders across the globe."
Officials have said that concerns about the audits raise concerns that are bigger than the scandal itself, which is being compared to the Enron scandal in the U.S.
Officials with the Securities and Exchange Board of India said they have a memorandum of understanding with officials at the U.S. Securities and Exchange Commission to share information but that the case falls under Indian jurisdiction. Shares of Satyam trade on the New York Stock Exchange, meaning it is also regulated by the SEC. Noting that the U.S. can launch its own investigation, Gupta told reporters that U.S. investigators "don't have to talk to us or seek our permission. They have their legislations, we have ours. It is not overlapping."
Separately, analysts are suggesting that the company could be snagged by competitors quickly. According to a report on ZDNet Asia, Satyam - India's fourth biggest outsourcer holds contracts with 185 Fortune 500 companies - has annual revenue of more than $2 billion but that there's no trust in the company right now - one of the other reasons that the full board needs replacing.
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