imported>DaxServer: Reverting edit(s) by 2409:4042:803:AE08:AA79:E46:1408:D4D3 (talk) to rev. 1030764149 by Mcpusc: non-constructive (RW 16.1)

2021-06-29T18:48:09Z

Reverting edit(s) by 2409:4042:803:AE08:AA79:E46:1408:D4D3 (talk) to rev. 1030764149 by Mcpusc: non-constructive (RW 16.1)

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{{Use dmy dates|date=September 2013}}
{{Use Indian English|date=September 2013}}
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{{cleanup|date = May 2011}}
{{refimprove|date=October 2016}}
{{expert|1=India|date=October 2016}}
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The '''[[Satyam Computer Services]] [[accounting scandal|scandal]]''' was a [[corporate scandal]] affecting [[India]]-based company [[Satyam Computer Services]] in 2009,<ref>{{cite web|url=https://www.hindustantimes.com/business/satyam-scam-all-you-need-to-know-about-india-s-biggest-accounting-fraud/story-YTfHTZy9K6NvsW8PxIEEYL.html|title=Satyam scam: All you need to know about India's biggest accounting fraud|date=9 April 2015}}</ref> in which chairman Byrraju Ramalinga Raju confessed that the company's accounts had been falsified.<ref name=TheHinduSatyam />

==History==
===Initial confession and charges===
On 7 January 2009, the chairman of Satyam, [[ Byrraju Ramalinga Raju]], resigned, confessing that he had manipulated the accounts of [[Rupee|Rs]] 14,162 [[crore]] (almost 3bn USD at the time) in several forms. The global corporate community was said to be shocked and scandalised.<ref name=TheHinduSatyam>{{cite news|url=https://www.thehindu.com/specials/timelines/satyam-scandal-who-what-and-when/article10818226.ece|title=Satyam Scandal: Who, what and when|first=Internet|last=Desk|newspaper=The Hindu|date=9 April 2015|via=www.thehindu.com}}</ref>

In February 2009, the [[Central Bureau of Investigation|CBI]] took over the case and filed three partial charge sheets (dated 7 April 2009, 24 November 2009, and 7 January 2010), over the course of the year.<ref name=TheHinduSatyam /> All charges arising from the discovery phase were later merged into a single charge sheet.{{clarifyme|date=October 2016}}{{fact|date=October 2016}}

On 10 April 2015, [[Byrraju Ramalinga Raju]] was convicted with 10 other members.<ref>{{cite web|url=https://www.ndtv.com/india-news/satyam-fraud-verdict-in-6-year-old-case-likely-today-753451|title=Satyam Founder Ramalinga Raju, 9 Others Convicted of Multi-Crore Accounting Fraud|website=NDTV.com}}</ref>{{fact|date=October 2016}}

===Role of Auditors===
[[PricewaterhouseCoopers]] affiliates served as independent auditors of [[Satyam Computer Services]] when the report of scandal in the account books of Satyam Computer Services broke. The Indian arm of PwC was fined $6 million by the SEC ([[U.S. Securities and Exchange Commission|US Securities and Exchange Commission]]) for not following the code of conduct and auditing standards in the performance of its duties related to the auditing of the accounts of Satyam Computer Services.<ref>{{cite web | url=https://www.sec.gov/news/press/2011/2011-82.htm | title=SEC Charges India-Based Affiliates of PWC for Role in Satyam Accounting Fraud | publisher=Securities and Exchange Commission | date=5 April 2011 | access-date=2013-04-27}}</ref> In 2018, SEBI ([[Securities and Exchange Board of India]]) barred Price Waterhouse from auditing any listed company in India for 2 years, saying that the firm was complicit with the main perpetrators of the Satyam fraud and did not comply with auditing standards. SEBI also ordered disgorgement of over Rs 13 crore wrongful gains from the firm and 2 partners. PwC announced their intent to get a stay order.<ref>{{cite web | url=http://www.hindustantimes.com/business-news/satyam-scam-all-you-need-to-know-about-the-case-against-price-waterhouse-and-sebi-decision/story-Ot1RbPuEyn6FoYVPQDxH9M.html | title=Sebi bars Price Waterhouse: What is the firm's role in the Satyam scam? | publisher=Securities and Exchange Commission | date=11 January 2018 | access-date=2018-01-18}}</ref>

=== Aftermath ===
"We are obviously shocked by the contents of the letter. The senior leaders of Satyam stand united in their commitment to customers, associates, suppliers and all shareholders. We have gathered together at Hyderabad to strategize the way forward in light of this startling revelation."{{fact|date=October 2016}}

On 10 January 2009, the Company Law Board decided to bar the current board of Satyam from functioning and appoint 10 nominal directors. "The current board has failed to do what they are supposed to do. The credibility of the IT industry should not be allowed to suffer." said Corporate Affairs Minister Prem Chand Gupta. Chartered accountants regulator ICAI issued show-cause notice to Satyam's auditor [[PricewaterhouseCoopers]] (PwC) on the accounts fudging. ICAI President Ved Jain said: "We have asked PwC to reply within 21 days."{{fact|date=October 2016}}

Also on 10 January 2009, the same day, the [[Crime Investigation Department (India)|Crime Investigation Department]] (CID) team picked up Vadlamani Srinivas, Satyam's then-CFO, for questioning. He was arrested later and kept in [[judicial custody]].<ref>{{cite news | url=http://economictimes.indiatimes.com/articleshow/3964323.cms | title=Satyam ex-CFO Vadlamani Srinivas sent to judicial custody till Jan 23 | newspaper=The Economic Times | date=11 January 2009 | access-date=2015-12-19}}</ref>

On 11 January 2009, the government nominated noted banker [[Deepak Parekh]], former [[NASSCOM]] chief [[Kiran Karnik]], and former SEBI member C Achuthan to Satyam's board.{{fact|date=October 2016}}

Analysts in India have termed the Satyam scandal India's own [[Enron scandal]].<ref>[https://archive.today/20120905214323/http://www.msnbc.msn.com/id/28539007/ Satyam scandal could be 'India's Enron'] – World business- msnbc.com (updated 11:42 a.m. ET 7 January 2009)</ref> Some social commentators see it more as a part of a broader problem relating to India's family-owned corporate environment.<ref>[http://kafila.org/2009/02/13/the-caste-of-a-scam-a-thousand-satyams-in-the-making/ The Caste of a Scam: A Thousand Satyams in the Making]. Kafila.</ref>

Immediately following the news, [[Merrill Lynch]] (now a part of [[Bank of America]]) and [[State Farm Insurance]] terminated its engagement with the company. Also, [[Credit Suisse]] suspended its coverage of Satyam.{{Citation needed|date=January 2009}} It was also reported that Satyam's auditing firm PricewaterhouseCoopers will be scrutinised for complicity in this scandal. SEBI, the stock market regulator, also said that, if found guilty, its license to work in India may be revoked.<ref name="Reuters08Jan2009-PwC">[http://in.reuters.com/article/companyNews/idINHKG30879120090108 Satyam scandal rattles confidence in accounting Big Four]. In.reuters.com.</ref><ref name="ICAI-PwC-explanation">[http://www.livemint.com/2009/01/07165018/ICAI-to-seek-explanation-from.html ICAI to seek explanation from Satyam’s auditor PwC]. Livemint.com (7 January 2009).</ref><ref name="PwC-Satyam-explanation">[https://www.reuters.com/article/marketsNews/idINBMA00213420090107?rpc=44 Satyam auditor says examining chairman's statement]. Reuters.com (7 January 2009).</ref><ref name="VCCircle-PwC-Satyam-explanation">[http://www.vccircle.com/500/news/what-happens-pwc-the-auditor-for-satyam What happens to PWC, The Auditor For Satyam?]{{dead link|date=September 2013}}</ref><ref name="Rediff-PwC-Satyam-">[http://www.rediff.com/money/2009/jan/07satyam-satyam-auditors-body-to-pull-up-pwc.htm Satyam: Auditors' body to pull up PwC ICAI to seek explanation from Satyam’s auditor PwC]. Rediff.com.</ref> Satyam was the 2008 winner of the coveted Golden Peacock Award for Corporate Governance under Risk Management and Compliance Issues,<ref>http://www.goldenpeacockawards.com/GPA_RESULTS_ANNOUNCEMENT_2008.pdf</ref> which was stripped from them in the aftermath of the scandal.<ref>[http://economictimes.indiatimes.com/Infotech/Software/Satyam_stripped_off_Golden_Peacock_Global_Award/articleshow/3949334.cms Satyam stripped off Golden Peacock Global Awards] – Software-Infotech-The Economic Times (8 Jan 2009, 0118 hrs IST, PTI)</ref> The [[New York Stock Exchange]] has halted trading in Satyam stock as of 7 January 2009.<ref>[https://web.archive.org/web/20090208225833/http://sify.com/finance/fullstory.php?id=14832532&?vsv=TopHP1 NYSE halts trading in Satyam stock] – (Wednesday, 7 January 2009, 23:02) Sify.com</ref> India's [[National Stock Exchange of India|National Stock Exchange]] has announced that it will remove Satyam from its S&P CNX Nifty 50-share index on 12 January.<ref>[https://www.reuters.com/finance/stocks/keyDevelopments?symbol=SAY.N&timestamp=20090107142400&rpc=66 Satyam Computer Services Ltd (SAY.N) Key Developments (Stocks) Reuters.com] {{webarchive |url=https://web.archive.org/web/20090224005555/https://www.reuters.com/finance/stocks/keyDevelopments?symbol=SAY.N&timestamp=20090107142400&rpc=66 |date=24 February 2009 }}</ref> The founder of Satyam was arrested two days after he admitted to falsifying the firm's accounts. [[Ramalinga Raju]] was charged with several offences, including criminal conspiracy, breach of trust, and forgery.{{fact|date=October 2016}}

Satyam's shares fell to 11.50 rupees on 10 January 2009, their lowest level since March 1998, compared to a high of 544 rupees in 2008.<ref>[http://news.bbc.co.uk/2/hi/business/7821087.stm Indian IT scandal boss arrested] – 9 January 2009 – Business – BBC NEWS</ref> On the [[NYSE|New York Stock Exchange]], Satyam shares peaked in 2008 at US$29.10. By March 2009, they were trading around US$1.80.{{fact|date=October 2016}}

The [[Indian Government]] has stated that it may provide temporary direct or indirect liquidity support to the company. However, whether employment will continue at pre-crisis levels, particularly for new recruits, is questionable.<ref>[http://www.moneycontrol.com/india/news/business/ready-to-bail-out-satyam-if-required-govt/377175 Ready to bail out Satyam, if required: Govt]. Moneycontrol.com (13 January 2009).</ref>

On 14 January 2009, Price Waterhouse, the Indian division of [[PricewaterhouseCoopers]], announced that its reliance on potentially false information provided by the management of Satyam may have rendered its audit reports "inaccurate and unreliable".<ref>[http://hosted.ap.org/dynamic/stories/A/AS_INDIA_SATYAM_PRICEWATERHOUSE?SITE=KFWB&SECTION=HOME&TEMPLATE=DEFAULT Price Waterhouse says its Satyam audits relied on company information, could be wrong]{{dead link|date=March 2009}} – 14 January 2009 – Associated Press</ref>

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 {{INRConvert|200|m|0}} every month for paying these 13,000 non-existent employees.<ref>[http://timesofindia.indiatimes.com/India_Business/Satyam_fudged_FDs_has_40000_employees_Public_prosecutor/articleshow/4015830.cms Satyam fudged FDs, has 40,000 employees: Public prosecutor]. ''The Times of India''.</ref>

The Indian government designated A. S. Murthy to become the new CEO of Satyam effective 5 February 2009. Special advisors were also appointed, Homi Khusrokhan of [[Tata Chemicals]] and Chartered Accountant [[T. N. Manoharan]].<ref>{{cite web|url=https://www.indiainfoline.com/|title=Share/Stock Market Investment, Financial & Share Market News, Mutual Funds & BSE/NSE Live Index Updates – IndiaInfoline|website=www.indiainfoline.com}}</ref><ref>[https://www.bloomberg.com/apps/news?pid=20601091&sid=aTQj1hK_OeXA&refer=india Satyam Names Murty as CEO to Replace Arrested Founder] – (5 February 2009, 1813 hrs IST) Satyam Names Murty as CEO to Replace Arrested Founder</ref><ref>[http://www.moneycontrol.com/india/news/business/as-murty-appointed-as-satyam-ceo/384024 A S Murty appointed as Satyam CEO] – (5 Feb 2009, 1816 hrs IST) A S Murty appointed as Satyam CEO Kiran</ref>

On 4 November 2011, the Supreme Court granted bail to Ramalinga Raju, as well as two others accused in the scandal, since the investigation agency CBI had failed to file a charge sheet, despite having already had 33 months (from the time of Raju's arrest) to do so.{{fact|date=October 2016}}

On 15 September 2014, the special CBI court hearing the case asked the concerned parties to appear before the court on 27 October 2014. Date of judgement was to have been indicated later on that day.{{fact|date=October 2016}}

On 9 April 2015, Raju and nine others were found guilty of collaborating to inflate the company's revenue, falsifying accounts and income tax returns, and fabricating invoices, among other findings, and sentenced to seven years imprisonment by Hyderabad court. Kunjumani and his brother were also fined by the court 55 million rupees (US$883,960) each.<ref>Retrieved from http://www.financialexpress.com/article/industry/companies/satyam-computer-case-b-ramalinga-raju-9-others-found-guilty/62062/.</ref>

==Acquisition of Satyam by Mahindra Group==
On 13 April 2009, via a formal [[public auction]] process, a 46% stake in Satyam was purchased by Mahindra & Mahindra owned company Tech Mahindra, as part of its diversification strategy. Effective July 2009, Satyam rebranded its services under the new Mahindra management as "Mahindra Satyam". After a delay due to tax issues<ref>[http://www.moneycontrol.com/news/business/mah-satyam-tech-mahindra-merger-may-be-delayed_522887.html moneycontrol.com]. moneycontrol.com (15 February 2011).</ref><ref>[http://www.moneycontrol.com/news/business/mah-satyam-tech-mah-to-appoint-bankers-to-fasten-merger_581330.html Mah Satyam-Tech Mah to appoint bankers to fasten merger]. Moneycontrol.com (30 August 2011).</ref> [[Tech Mahindra]] announced its [[Tech Mahindra-Mahindra Satyam merger|merger]] with Mahindra Satyam on 21 March 2012, after the board of two companies gave the approval.<ref>[http://www.livemint.com/2012/03/21094345/Tech-Mahindra-Satyam-get-nod.html /Tech Mahindra, Satyam get nod to merge]. Livemint.com (21 March 2012).</ref><ref>[http://profit.ndtv.com/News/Article/high-court-orders-shareholders-meeting-on-msat-tech-mahindra-merger-304000/ High Court orders shareholders' meeting on MSat-Tech Mahindra merger]. Profit.ndtv.com (11 May 2012).</ref> The companies are merged legally on 25 June 2013.<ref>[http://articles.economictimes.indiatimes.com/2013-06-26/news/40187424_1_satyam-merger-government-mediated-auction-tech-mahindra Tech Mahindra completes Satyam merger, becomes 5th biggest IT firm – Economic Times]. ''The Economic Times''. (26 June 2013).</ref><ref>[http://www.thehindubusinessline.com/industry-and-economy/info-tech/satyam-is-history-merger-with-tech-mahindra-complete/article4848975.ece Satyam is history, merger with Tech Mahindra complete | Business Line]. ''Business Line''. (25 June 2013).</ref>

==See also==
*[[Corruption in India]]
*[[Satyam Computer Services]]
*[[Tech Mahindra]]
*[[National Financial Reporting Authority]] (NFRA)

==References==
{{reflist}}

==External links==
*[http://www.hindu.com/nic/satyam-chairman-statement.pdf Satyam Chairman B. Ramalinga Raju's statement to the Board]
*[https://www.independent.co.uk/news/business/news/pricewaterhousecoopers-offices-searched-in-satyam-probe-1334267.html PricewaterhouseCoopers offices searched in Satyam probe]

{{Alleged scams in India}}
{{2008 economic crisis}}
{{Scams and confidence tricks}}
{{Corporate scandals}}

[[Category:Corporate crime]]
[[Category:Accounting scandals]]
[[Category:Fraud in India]]
[[Category:Accounting in India]]
[[Category:History of Andhra Pradesh (1947–2014)]]
[[Category:Crime in Andhra Pradesh]]
[[Category:Scandals in India]]
[[Category:Corporate governance in India]]

Satyam scandal - Revision history

imported>DaxServer: Reverting edit(s) by 2409:4042:803:AE08:AA79:E46:1408:D4D3 (talk) to rev. 1030764149 by Mcpusc: non-constructive (RW 16.1)