Satyam Scam

Topics: Corporate governance, Board of directors, Standard & Poor's Pages: 8 (2134 words) Published: September 28, 2011
Corporate Governance at SATYAM |
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Submitted to-Prof. Rajan Mani|
Submitted by- Khushbu Gumber| Shivi Singh| Siddharth Talokar Vikrant Shinde| 9/26/2011|

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Table of Contents

Content| Pg. No.|
Company Background| 3|
The good thing about SATYAM fiasco| 5|
Rating Agency- CRISIL| 7|
SATYAM analysis| 10|
Conclusion| 12|

Company Background
Ramalinga Raju had founded SATYAM Computers in 1987 and was its chairman till 7th January 2009. The SATYAM fraud came to light on 7th January 2009 when Chairman Ramalinga Raju confessed that SATYAM’s accounts were falsified. He resigned from the SATYAM board after admitting that he had cheated six million share holders. He was charged with cheating, embezzlement and insider trading. Raju had appointed a task force to address the MAYTAS situation in the last few days before revealing the news of the accounting fraud. MAYTAS ("SATYAM" read backwards) refers to a group of companies founded by B. Ramalinga Raju. It includes MAYTAS Properties and MAYTAS Infra Limited. After the scandal broke, the then-board members elected Ram Mynampati to be SATYAM's interim CEO. On 10th January 2009, the Company Law Board decided to bar the current board of SATYAM from functioning and appoint 10 nominal directors. Chartered accountants regulator ICAI issued show-cause notice to SATYAM's auditor Price Waterhouse Coopers (PwC) on the accounts fudging. On the same day, the Crime Investigation Department (CID) team picked up Vadlamani Srinivas, SATYAM's then-CFO, for questioning. On 11th January 2009, the government nominated noted banker Deepak Parekh, former NASSCOM Chief Kiran Karnik and former SEBI (Securities and Exchange Board of India) member C Achuthan to SATYAM's board. Some social commentators see it more as a part of a broader problem relating to India's caste-based, family-owned corporate environment. SATYAM was the 2008 winner of the coveted Golden Peacock Award for Corporate Governance under Risk Management and Compliance Issues which was stripped from them in the aftermath of the scandal. On 14th 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.

On 22nd January 2009, CID told in court that the actual number of employes is only 40,000 and not 53,000 as reported earlier and that Mr. Raju had been allegedly withdrawing INR 20 crore rupees every month for paying these 13,000 non-existent employees. On 5th February 2009, the six-member board appointed by the Government of India named A. S. Murthy as the new CEO of the firm with immediate effect. Murthy, an electrical engineer, had been with SATYAM since January 1994 and was heading the Global Delivery Section before being appointed as CEO of the company. The two-day-long board meeting also appointed Homi Khusrokhan (formerly with Tata Chemicals) and Partho Datta, a Chartered Accountant as special advisors. On 13th 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" with a new corporate website www.MahindraSatyam.com. In the wake of SATYAM scam, the Citizens for a Better Public Transport in Hyderabad (CBPTH) demanded a CBI inquiry into the process of how MAYTAS bagged the Hyderabad Metro Rail project. The CBPTH convener C Ramachandraiah alleged that the state government had been favoring MAYTAS for infrastructure projects. The...
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