Satyam Computers, one among India's largest outsourcing giants, collapsed in a heap of
frauds at the dawn of 2009. Everyone termed it as India's `Enron' and a few others observed
that it had more shades of `Madoff'. It all started, when Ramalinga Raju pushed his plan
of acquiring Maytas properties and Maytas Infra, as a method of diversification. However, his
plans could not succeed and the aborted attempts forced him to confess the frauds, which had
taken place over the last several years. The revelations made by him include inflating revenues,
profits and reserves and under estimation of liabilities. The amount involved in the fraud amounted
to a whooping figure of Rs. 7,500 cr roughly.
An analysis of the fraud reveals a major breakdown in corporate governance mechanism.
The fraud that is reported to have been going on for several years has escaped the attention of
both, internal and external auditors. The independent directors, who have got the responsibility
of guiding the corporate and safeguarding the interest of the shareholders, have been mute
spectators to the fraud, as they were picked up from persons who were familiar to the management
and enjoyed pecuniary benefits.
Insiders trading made its presence through directors and other vested persons there.
Presuming that Raju was going to confess the fraud, they started selling their shares at a high price
and gained substantial benefits.
The early signals that came from market, (i.e., World Bank barring Satyam from doing
their work), as regard to the deteriorating health of Satyam, had not made the regulators suspect
the fishy affairs. |
