satyam scam in detail

2. INTRODUCTION
 Satyam Computers was founded
in 1987 by Mr. B Ramalinga Raju.
 It converted into Public Ltd Co. in
1992.
The company offers consulting and
information technology services
spanning various sectors.
Satyam's network covers 66
countries and 53000 employees
across six continents. It is listed in
BSE, NSE, NYSE .

3. The Scam
■ The scandal broke in 2009 when founder-chairman of Satyam Computers
Ramalinga Raju confessed that the company’s accounts were tampered
with.
■ This was perhaps India's biggest corporate fraud case where M/s Satyam
Computer Services Limited (M/s SCSL) caused loss to the investors to the
tune of Rs.14,162 crore.The company head, Ramalinga Raju and
members of his family secured illegal gains to the tune of about Rs.2,743
crore by various tricks.
■ The fraud was perpetrated by inflating the revenue of the company
through false sales invoices and showing corresponding gains by forging
the bank statements with the connivance of the Statutory and Internal
Auditors of the company.The annual financial statements of the
company with inflated revenue were published for several years and this
lead to higher price of the scrip in the market. In the process, innocent
investors were lured to invest in the company.Attempts were made to
conceal the fraud by acquiring the companies of kith and kin.

4. People Behind the Scam
■ Ramalinga Raju: Satyam former chairman
■ B Rama Raju: Brother of Ramalinga Raju and Former
Managing Director
■ V Srinivas: Ex-Chief financial officer
■ S Gopalakrishnan: PriceWaterhouse Auditor
■ Talluri Srinivas: Price Waterhouse Auditor

5. Who is B. Ramalinga Raju?
■ Ramalinga Raju was born on September 16,
1954 in Andhra Pradesh
■ He founded Satyam Computers and was its
Chairman until January 7, 2009 when he
resigned from the Satyam board after
admitting to corporate fraud.

6. ■ Satyam was until recently perceived to be
amongst the top Indian IT vendors.
■ Raju has admitted to overstating the company's
cash reserves by USD$ 1.5 billion. Later, a person
involved in the investigation of the company said
that the company's assets were not inflated, but
instead siphoned off by Ramalinga Raju.
■ Raju is currently held in Hyderabad's
Chanchalguda jail on criminal charges including
fraud, forgery, cheating, embezzlement and
insider trading.

13. Anatomy of a fraud
1. Maintaining records
• Raju maintained thorough details of the Satyam's accounts and minutes of
meetings since 2002.
• Raju stored records of accounts for the latest year (2008-09) in a computer
server called "My Home Hub.”
2. Fake invoices and bills
• Details of accounts from 2002 till January 7, 2009 – the day Raju came out with
his dramatic, five-page confession - were stored in two separate Internet
Protocol (IP) addresses.
• Fake invoices and bills were created using software applications such as
'Ontime' that was used for calculating hours put in by an employee
• A secret programme was allegedly planted in the source code of the official
invoice management system creating a user id 'Super User' with the power to
hide or show the invoices in the system.

14. 3. Web of companies
• A web of 356 investment companies was used to allegedly divert funds from
Satyam.
• These companies had several transactions in the form of inter-corporate
investments, advances and loans within and among them.
• One such company, with a paid up capital of Rs 5 lakh, had made an investment of
Rs 90.25 crore and received unsecured loans of Rs 600 crore.
4. Why did he need the money
• The cash so raised was used to purchase several thousands of acres of land across
Andhra Pradesh to ride a booming realty market.
• It presented a growing problem as facts had to be doctored to keep showing
healthy profits for Satyam that was growing in size and scale.
• Every attempt made to eliminate the gap failed.
• As Raju put it, "it was like riding a tiger, not knowing how to get off without being
eaten.”
• Cashing out by selling Maytas Infrastructure and Maytas Properties to Satyam for
an estimated Rs 7,800 crore was the last straw.The attempt failed and Raju made
the stunning confessions three weeks later.

15. The Over-stated Figures
■ The Balance sheet as of September 30, 2008
showed Inflated (non-existent) cash and
bank balances of Rs.5040 crores.
■ An accrued interest of Rs. 376 crores which is
non-existent.
■ An understated liability of Rs.1230 crores on
account of funds arranged by Mr. B Rama
Raju.

16. What is the Satyam scam about?
It is about corporate governance and fraudulent auditing practices
allegedly in connivance with auditors and chartered accountants.
The company misrepresented its accounts both to its board, stock
exchanges, regulators, investors and all other stakeholders.
Is this an accounting fraud, a market
manipulation or both?
It is a fraud, which misled the market and other stakeholders by
lying about the company’s financial health. Even basic facts such
as revenues, operating profits, interest liabilities and cash
balances were grossly inflated to show the company in good
health.

17. Who is to blame here? The promoters?
The promoters are primary culprits, although it is almost
impossible to misrepresent such facts without the connivance of the
auditors and some executive board members. Independent
directors, it seems, were kept in the dark about the actual books of
accounts.
What about the auditors?
The role of external third party auditors, who were tasked to ensure that no
financial bungling is undertaken to carry out promoters’ interest or hide
facts, have also been brought to question

18. PwC : partner In crime???
 Previous Records
 Satyam has also been accused of frauds
in 2001 and 2003
 No importance was given to this
 Getting third party evidence
 No bank confirmation on fixed deposit
 Accrued interest on fixed deposits
 Debtors confirmation
 Factors overlooked
 Huge debts despite cash surplus
 Changing of accounting years

19. ■ The gap in the balance sheet reached
unmatchable proportion and could not be
filled anyhow in future;
■ A whistle blower whose email to a Satyam
board of member triggered a chain of events
Why did Raju Confess?

20. PROBABLE REASONS
Pressure to meet
expectation
Growing competition
Threat of being overtaken
On his ability
Siphoning of funds
Salary of non existing 13000
employees
Overconfidence
Personalbenefits
Since about seven years we wanted to show more
INCOME in the accounts to avoid others from involving
In the company affairs and any hostile acquisition

21. Action Taken:
 New board of directors were appointed.
 Disclosure of pledged securities.
 Increased financial accounting disclosure.
 Adoption of international standards.
 Creation of new corporate code of conduct by Ministry of
Corporate Affairs.
 Steps taken by ICAI.

22. Regulators Investigating Satyam
Scam

23. Consequences
■ Before the scandal it’s share price was Rs 300 in
oct.2008. Just after this scandal the share price go
down to Rs 6.30.
■ On 10 January 2009, the Company Law Board decided
to bar the current board of Satyam from functioning.
■ Bank of America and State Farm Insurance terminated
its engagement with the company.
■ Credit Suisse suspended its coverage of Satyam. The
Credit Suisse Group AG (SIX: CSGN, NYSE: CS) is a
Swiss multinational financial services company
headquartered in Zurich, Switzerland.

24. Impact Of The Scam
■ Jobs of over 50,000 technocrats were at
risk.
■ Country’s booming economy was at risk.
■ The GDP fell by 0.4%.
■ I.T sector suffered a downturn.
■ India’s global image was tarnished.
■ Indian stock market fell dramatically.

25. Company Logo
IMPACT OF SCAM
Stock Market Share-holders Indian economy
Employees
Stake-holders
Impact of the Scam

26. Satyam Now
■ Ramalingam Raju along with 2 other accused of the scandal, was
granted bail from Supreme court on 4 November 2011 as the
investigation agency CBI failed to file the charge sheet even after
more than 33 months of Raju been arrested Appointing New
Board. Board appointed by Government.Tech Mahindra wins bid
for Satyam scam.
■ 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.

27. “IT WAS LIKE RIDING A
TIGER, NOT KNOWING
HOW TO GET OFF

28. SATYAM UNDER RECONSTRUCTION
• Appointing new board.
• Board appointed by government :
• former Nasscom chief – Kiran Karnik,
• Chairman HDFC – Deepak Parikh
• Former SEBI member – C. Achuthan .
• Satyam shares gained over 44% day after
appointment of the new board.
• New CEO – A S Murthy
• Tech Mahindra acquired Satyam on April
13,2009.

29. SATYAM UNDER RECONSTRUCTION
■ On 13th apr 2009, via formal public auction process, 46%
stake in satyam was purchase by mahindra.
■ July 2009, satyam rebranded its service as “mahindra
satyam”.

30. THANKYOU
Names Roll No.
 MishikaTalwar 091
 Chanchal Phore 075
 Kashish Anand 121