Views on the Satyam fraud case:
Before writing this report, I read some articles from The Economic Times, The Times of India, The Hindu and a blog by Shweta Rajpal. In this report, I have tried to figure out what the scam is all about, how it happened, why it was done and the aftermath, exploring corporate governance issues simultaneously. The ‘What’ of the scam:
The Satyam scam has been as the Enron scam of India. So one can only imagine the magnitude of wrongdoing and deception. The downfall of Raju began in Dec 08 when Satyam attempted to acquire two companies controlled by his sons - Maytas (the syllables of the word ‘Satyam’ used backwards) Properties and Maytas Infra - for 1.6 billion dollars in order to compensate for the holes in his books of account. The deal was abandoned 12 hours after it was announced when investors objected, claiming it was an irresponsible misuse of funds and an instance of nepotism. The Maytas deals acted as a red flag for international investors, with a host of companies like Unpaid Systems of Britain accusing Satyam of fraud, forgery and breach of contract. The ‘drain of wealth theory’ is substantiated by the fact that the share of Promoters in the company which was 25.6% in 2001, diminished to 3.6% in January, 2009. In fact according to information retrieved from NSE, not only Raju but CFO V.Srinivas, A.S.Murthy, V. Murli etc sold shares of 3,6500, 3,14,000, 1,83,000 respectively.The last straw perhaps came on Jan 09 when an Indian associate of Merrill Lynch terminated an agreement on grounds of "material accounting irregularities".
| The ‘Why’ of the scam:
Nepotism, favouritism, greed are the reasons that have been cited for Raju’s doing. Another dimension to it has been contributed by the epic Mahabharata, the Great War, which was caused due to Dhritarastra’s obsession for his son Duryodhana. Like many fathers, Raju too wanted to create two separate empires for his sons, Teja Raju and Rama Raju Jr. He subsequently...
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