Ramalinga Raju LAW INSIDER IN

Ramalinga Raju

Former chairman, Satyam Computers Services.

Name:  Byrraju Ramalinga Raju

Date of Birth: 16 September 1954

Alma Mater: Harvard Business School

Master’s Degree: MBA From Ohio University US

Occupation: Former Chairman/Founder, Satyam Computer Services Ltd.

Criminal Penalty: Convicted and Sentenced to 7 years in jail, currently out on bail.

Positions held: Chairman/Founder- Satyam Computer Services Ltd (1987-2009)

Founder-Satyam Infoway Ltd

Member-Confederation of Indian Industry

Member-Federation of Indian Chambers of Commerce & Industry

Member-Malaysia’s Multimedia Super-Corridor

Awards and Recognition:

  • Ernst and Young Entrepreneur of the Year Services Award in the year 1999
  • Dataquest IT Man of the Year Award in the year 2000
  • CNBC’s Asian Business Leader – Corporate Citizen of the Year Award in the year 2002
  • Lifetime Achievement Award conferred upon by Hyderabad Management Association (HMA) in the year 2005

Ramalinga Raju is a Businessman and Founder of Satyam Computers. Raju launched Satyam Computer in 1987, one of India’s first outsourcing firms, taking it public in 1992. Till 2009 Satyam Computers was India’s fourth-largest IT firm and was providing IT and accounting services for more than 600 large companies, including international conglomerates General Electric, Nestl, and BP.

Satyam Computer Services:

In 1987, he launched Satyam Computer Services along with one of his brothers-in-law, DVS Raju, in Hyderabad with merely 20 employees. Proving his entrepreneurial skills, Raju built Satyam into one of the biggest IT companies in India making it mark in the industry and the world IT map.

It started remotely delivering IT services to some clients in the US in 1991.The success with offshoring was followed by the Y2K boom, which instantly pushed Satyam to the top league.

In 1998, Raju launched Satyam Infoway (Sify) as Satyam’s internet subsidiary. [1] By 2008, Satyam Computer Services had more than 50,000 employees, with an annual revenue of more than 2 billion $. Apart from his booming success in the IT industry, he was also well-respected for his corporate social responsibility and philanthropy- Byrraju Foundation, EMRI 108 emergency services, amongst others.

Satyam Scam:

Initial Unfolding of the Fraud

On January 7, 2009, the then chairman of Satyam Computer Services Ltd, B Ramalinga Raju, resigned after writing a letter to the board of directors and stock exchanges that he had been systematically inflating revenue and profits for many years, by non-inclusion of certain payments and receipts.

This confession set off panic in the corporate sector, amongst Satyam’s investors and employees, pushing the company to the brink of bankruptcy. Weeks before the scam began to unravel, with his famous statement he was riding a tiger and did not know how to get off without being eaten.

In his letter he wrote how every attempt to burnish the company’s performance had failed, and an amount of Rs 5,040 crores that was supposed to exist on the company’s books simply did not exist.

The overall loss ultimately grew up to an amount of 14,000 crore. It is a fraud in every sense so far, the basic facts about the company’s health such as revenues, operating profits, interest liabilities and cash balances were grossly inflated to show it was in good health.

The role of the promoters cannot be overlooked, as they are the primary culprits, who allegedly inflated revenue, fabricated invoices, falsified accounts and income tax returns, and forged fixed deposit receipts.[2]

Role of PricewaterhouseCoopers- Auditor Firm

The role of the auditor firms was also questioned in the case, where SEBI (Security Exchange Board of India) ultimately found the affiliates of the independent auditor firm, PriceWaterhouse Coopers complicit in the scandal, as it is impossible to misrepresent such facts without the connivance of the auditors.

Finding them guilty of the same, SEBI held that PW showed a complete disregard for the stipulated accounting practices, and the long period of falsification- PW served as the auditors for Satyam from 2000-2008- point to lack of attention towards the fudging of the books of accounts.

The auditors made material representations without any solid documentary proof. [3]The firm relied on these documents which were most likely sourced or had originated from the company itself.

Ultimately, the regulatory authority SEBI found PW guilty of not complying with the auditing standards and banned all the firms in the Price Waterhouse network (PW firms) from auditing listed companies for two years in 2018.

It was also fined $6 million by the SEC (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.

The SEBI in its 108-page order said that an auditor should proceed with an attitude of scepticism, and not get swayed by the reputation of the company.[4]

Proceedings against Raju

As far as repercussions for Ramalingam Raju go, in his letter he had expressed his intention to subject himself to the laws of the land and face consequences thereof.  He along with 9 others were convicted and sentenced to seven years rigorous imprisonment by a special CBI court of the CBI for economic offences, that also fined him ₹ 5.5 crore.

All 10 accused in the case were convicted of criminal conspiracy, cheating and breaching public trust. [5]In the same year, within a month of conviction, he and all others who were found guilty were granted bail by a special court in Hyderabad.

Aftermath of the scandal

Satyam was the 2008 winner of the coveted Golden Peacock Award for Corporate Governance under Risk Management and Compliance Issues, which was revoked in the aftermath of the scandal.

The Andhra Pradesh government also attached properties belonging to the family of the promoters of Satyam Computers. The Central Bureau of Investigation and the Enforcement Directorate also attached close to 6,000 acres of Raju’s properties, which can only be accessed by him if a higher court suspends his conviction.

Current Scenario

In the aftermath of the scandal, the government had ordered an auction for sale of the company It was acquired by Tech Mahindra, and was then renamed as Mahindra Satyam, and was eventually merged into the parent company, as a part of its diversification strategy.

Very recently in the year 2018, SEBI passed a fresh order barring B Ramalinga Raju and three other entities from the securities markets for 14 years and directed them to return Rs 813 crore worth unlawful gains with interest.[6]

  1. <Business Standerd Post>
  2. < https://www.hindustantimes.com/business/satyam-scam-all-you-need-to-know-about-india-s-biggest-accounting-fraud/story>
  3. < https://www.livemint.com/Money/Y47acOIxS2uXDmTzG1xKDP/Price-Waterhouse-firms-banned-for-2-years-over-Satyam-scam.html>
  4. Ibid.
  5. < https://www.hindustantimes.com/business/satyam-case-ramalinga-raju-all-other-accused-sentenced-to-7-years/story>
  6. < https://www.financialexpress.com/industry/satyam-scam-sebi-passes-fresh-order-directs-b-ramalinga-raju-3-others-to-disgorge-over-rs-813-cr/1370836/>