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By the end of the day, the fourth largest IT company lost a staggering Rs 10,000 crore in market capitalisation as investors reacted sharply and dumped shares, pushing down the scrip by 78 per cent to Rs 39.95 at BSE. The NYSE-listed firm could also face regulator action in the US.
The government, regulator SEBI and the industry reacted with shock and anguish over the turn of events that could tarnish India's corporate and raise vital issue like ethics, corporate governance and accounting and business practices.
Acting in tandem, Corporate Affairs Ministry and SEBI announced that the episode would be probed and action taken against the perpetrators of the fraud that entails inflating profits and creating fictitious assets.
"I am now prepared to subject myself to the laws of the land and face consequences thereof," Raju said in a letter to SEBI and the Board of Directors, while giving details of how the profits were inflated over the years and his failed attempts to "fill the fictitious assets with real ones."
The Maytas firms, although promoted by his family, proved to be his nemesis, with Raju saying: "The aborted Maytas acquisition deal was the last attempt to fill the fictitious assets with real ones... But that was not to be. What followed in the last seven days is common knowledge."
While the government said the entire issue would be referred to the Serious Fraud Investigation Office, SEBI described it as an event of "horrifying magnitude." "It was like riding a tiger not knowing how to get off without being eaten," said Raju.
Removal from Sensex, Nifty
Satyam Computers may be removed from the Sensex and Nifty following the revelation of manipulation in the company's accounts, analysts said. Rajiv Mehta, senior analyst with India Infoline, a large brokerage house said his firm has immediately stopped covering Satyam and many other brokerage houses are also expected to do the same. There will not be any investor interest in the company anyway. The company may be removed from sensex and nifty, he said.
With the fall in its stock prices, Satyam has lost its weightage in the sensex considerably over the recent past and currently has weightage of only 1.56 as of Tuesday. While in nifty, the weightage is only 0.63 per cent.
B Ramalinga Raju can get a 7-year jail term
Satyam Computer Chairman B Ramalinga Raju can face seven years' imprisonment in addition to monetary penalties for forging accounts, breach of trust and misappropriating funds.
"He (Raju) can be charged under various sections of the Indian Penal Code for falsification of accounts, cheating and breach of trust. These offences attract a maximum penalty of seven years," said a senior partner of law firm Titus and Company, Diljeet Titus.
Expressing a similar opinion, senior Supreme Court advocate C A Sundaram said, "If the admissions (made by Raju in his resignation letter) are true, it is a very serious matter. It would be violation of (the) SEBI (code), Company Law and the IPC".
Another senior advocate and corporate law practitioner U K Chaudhary said the Satyam chief could be imprisoned for seven years under various provisions of company law. "Under section 628 of the Companies Act, which deals with misrepresentation of accounts, he could be punished for a maximum of 2 years along with penalty. However, the punishment term could be extended to seven years for producing false affidavits and other documents," he said.
In addition to Raju, Titus said "action should also be taken against Chief Financial Officers, Finance Managers, and Legal and Tax Advisors for their complicity in this episode".
Suggesting that the CBI should get into the case, he said if appropriate action is not taken, the Satyam fiasco would "make a mockery of the Indian enforcement mechanism".
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Sir,A petty thief would have been arrested by now. But such a big fraud has not been arrested so far. WHAT IS OUR LAW ENFORCING AGENCIES ARE DOING NOW? WHY HAVE THEY NOT ARRESTED MR. RAJU WHO HIMSELF HAS ADMITTED TO THE FRAUD WITHOUT ANY COERCION? Why the Statutory Auditors, Company Secretary etc., have not been arrested so far? Is it not required that by this time all his Accounts should be frozen, his known assets attached, his passport impounded? All can be done, if the Government really wants, in a split second. But nothing has been done so far. It is quite baffling. Is there any rule of law in the country? Or there is one rule for a petty thief and another rule for Big Frauds? Why the Political Parties are keeping quiet? They have nothing to say on such a big event? It is a shame.
No one is perfect. Mistakes and errors do happen. Ramalinga Raju was the creator of Satyam and he had brought up this organization from scrap to what it was, a few days ago. No denying the fact that there had been a huge fraud committed, but at least the man had the courage to come out and say that he was responsible. There can be a million people saying a million things, but it is true that what Satyam had represented to its employers and its customers is true. The value brought by the company to its customers is true. The competence and the capability of its 53000 Employees is true. This will survive. There may be huge hits, but it wil survive. At the end of this evolution, satyam may not remain as SATYAM, but the value generated and the effort put in will not go for waste. This was no organized crime and the intention was not to fool the investors. The intention was to stay in the market and keep the business running. It has failed. Failed miserably. Let us see on what happens next.
It's like the recent ENRON case in the USA. It projects a bad image of India world over, especially ot its booming corporate sector. Shame on you Mr. Raju.
WHO WILL CERTIFY ABOUT OTHER COMPANIES????
What a spineless man .. what a strategy ... if I drown I take the titanic along with me... This is exactly what Raju has done - he has a purposeful ulterior motive in making this disclosure.
Ramalinga Raju has proved it.This is a country where a businessman is considereed a cheat as the saying goes. Logically, a small businessman is a small cheat and the big businessman, a big cheat. 8000 Corers is a big amount. The banks favour big cheats with sub-prime interest rates and pernalize small cheats with higher interest rates. To reduce the cost of finance, the small cheat will have to grow and become a big cheat by whatever means. Then, there are greedy investors to be tapped through the stock-markets. If you fail in fooling, you have a story to tell, that you wanted to make some thing virtual to real. It is possible to fool so many people including ones self!
Nothing will happen to them in real sense even if he or any other people directly orchestrated this scam. The case will go on for ever (provided he has proper connections with all the concerned political leaders), he will be out in bail, business as usual after the initial dust is settled. No rich and powerful person with proper connections will ever be prosecuted in India.
Corporate fraud, punishment of industrialist and businessmen are at its worst in post-independent India. Majority of Indian corporate houses are fully involved in business malpractice, cheating its customers and its own employees. There is not a single case of successful prosecution in (prevention of) “food adulteration” law even we all know the level of food and drug adulteration we face on a a daily basis. Even after more than 50 people killed due to poisonous mustard oil in Delhi, not a single businessman was prosecuted. Medical malpractice by many doctors, unethical clinical trials by some high profile Indian MNCs (to name a few) were never brought to justice. If you have money and power, you can do almost anything in India. Judiciary, police, political system has totally rotten to their cores. No wonder, gradually people are taking laws into their own hands.
In SATYAM’s case, I think so other than Raju and MD, the chartered accountants of the company are also responsible. Without the consent of CAs, there is 0% probability of fraud. The auditors’s report is going to be taken into consideration and not director’s report. Also, CAs have the right of attending Board Meetings, where CAs can opine
I still don't understand. Why should a CMM Level 5 company managing such complex projects become bad in 1 single day? Its time Financial Analysts stop telling which IT company is good or bad. If Satyam's processes, people and infrastructure is good, its only time before Satyam bounces back. I advise Satyam to stay away from these FINANCIAL ANALYSTS who always have some nefrarious ideas when they bring up or beat down a stock. If somebody is selling, then definitely, someone is BUYING too. We must check who is buying these stocks.
In SATYAM’s case, I think so other than Raju and MD, the chartered accountants of the company are also responsible. Without the consent of CAs, there is 0% probability of fraud. The auditors’s report is going to be taken into consideration and not director’s report. Also, CAs have the right of attending Board Meetings, where CAs can opine
Yes, alongwith Mr. Ramalinga Raju, the chartered Accountants who audited the accounts during the period of fraud also to be booked.There should be severe punishments for such crimes.
Mr. Raju along with his Auditors, his entire Finance department should be put into jail.
This founder and his cohorts have quoted false financial results to inflate the share price and then quietly sold off their stake. Thousands of investors have now been cheated out of their life time earnings. These cheats should be prosecuted like Enron and Worldcom chiefs and be sentenced to minimum 30 years in prison. Anything less would be an injustice
At least Mr. Ramalinga Raju was good enough to spill tbe beans himself sparing elaborate investigations.
Why only upto seven years (whohc could anything from 1 hour to 7 years) only for such a serious crime that affects lakhs of people and also the country's growth and image abroad. Isn't it more consequesntial than the terrorist attack in Mumbai. Such people should be jailed for life-term (ot 12 years, but 100 years-like they do in the west) and their wealth should be confiscated. The money invested by them to pop-up Maytas should be confiscated too and distributed to the share-holders as it was their money. Upto!!! 7 years is nothing for such a crime that might drive many investors and employees into poverty and suicide. Delisting it from the stock exchanges will only mean that the share-holders loose all their money.
Where are auditors from ICAI and who will fix threr accountablity. Behind every fraud there are Chartered Accountants also. Hang them also with Raju.
Guys, This kind off Accounting fraud is all over world. Most of US compaines were with same problem
Dont the auditors of the firm have a responsibility? Surely this fraud could have happened without their participation. They should be debarred from further practice with immediate effect.
Raju is now being considered biggest fraudy than once Laloo was accused of 1,000 Crore Bihar Fodder Scam. What a nice man Raju is, created assets worth 8,000 crore fictitious/artificial and ejoyed in the market. Many accountants will learn this aspect also. Well Done Raju.
I dont know why people are crying foul so badly for this matter, when these were happening at many intervals of time. This is not ATYPICAL to business, especially multi millionaire businesses. They are vulnerable and there is not a system in place, which can give an early sign!!! People are so indignified and immatured to blabber many things out ehre. I dont think nay of them would go even near to Ramalinga raju in respect to the number of employement opportunities he created, number of Indians excelled and bettered thier lives, number of livelyhoods he mattered....Indeed people like these can only blabber in these kida forums, coz in deed they cant do a THING`
Satyam is only the icing on the top.With the meltdown, all skeletons from various companies will come tumbling out.Ever wondered why banks are unable to reduce interest rates inspite of HUGE reductions in rates by RBI? Has anyone suggested an independent audit into the cause of "high cost of funds" which banks claim ? If the SEBI and RBI do not move fast, cases like Satyam will bring heavy damage to the INDIA Inc and all businesses in India
Satyam had stolen the datas from united nation,now account frauds, Laxmi mittals was finned 360 millions dollars on charge of fixing steel prize,Ambani is under investigation from FBI for dealing with Iran.How come hindu indians are involve with all frauds.time has come world communities should take care while dealing with hindu buisiness men who are born corrupt.
What Pakistanis Tried all their life? Raju would do it in a day.. Destroying Business in India.
Satyam had it coming for a long time.That the bubble has burst is not a surprise, but how it lasted is a greater surprise.Its time to change our corporate laws.Nothing will happen to Ramalinga Raju. At the best he will be arrested, only to be admitted in a corporate hospital, till the din dies down.Thereafter it will be business as usual.Nothing changes in our country.Only the actors change.Harshad Mehta, Ketan Parekh, Telgi and now Ramalinga Raju.