ABSTRACT
The Satam scam was one of the most significant and large scale cooperate-accounting fraud of thousands of crores in the Indian History. It includes the manipulation of financial statements, the bills by SATYAM COMPUTER SERVICES Ltd an Indian IT service company,of which the founder chairman was Ramalingam Raju.
However his reputation shattered in 2009 January when he confess a massive financial fraud (inflating the company’s assets in billions and the fraud came in lime light. This confession revealed many accounting irregularities which includes falsified accounts, exaggerated profits etc
The scam leds to a decline of the stocks price of Satyam many financial losses of shareholders, and shattered the investors in cooperate sector. Security and exchange board of India (SEBI) and Central Bureau of Investigation (CBI) started investigating which result in legal action against the company’s high officials.
During crises Mahindra acquired Satyam company and brand name came as Mahindra Satyam which later merged to tech Mahindra. This article deals with the case study in cooperate,,governance and importance of regulatory bodies as SEBI and CBI etc.
INTRODUCTION
The Satyam scam is one of the largest corporate frauds in India, came to lime light in January 2009 when Ramalinga Raju, the chairman of Satyam Computer Services, confessed about the fraud (inflating the company’s financial statements,companies bill).
Satyam Computer Services Ltd an IT services company formed in Hyderabad, India, Ramalinga Raju as chairman in 1987. The company experienced rapid growth and, by in mid of 2000s, had become one of India’s top IT company. It became one of the major stock exchanges including the New York Stock Exchange (NYSE). Satyam computer service ltd provided services such as software development, system maintenance, and consulting, etc to clients worldwide. The company’s growth was often cited as a step forward to flourish India’s IT sector.
As generally said,what rises rapidly often falls just as quickly. So on 7 January 2009 confession of fraud came from side of Ramalingam raju. He confessed to manipulating the account of the company and inflating profits for many year that includes exaggerating sales, earnings, cash balances, and personnel numbers in the books of the company . He also revealed drain money from the firm for his personal use.
The fraud came out when the chairman Ramalingam raju confessed by letter to board of directors which shocks the corporate world and investors,employers,were left shattered .The government regulatory agencies such as SEBI and CBI started their investigation.
The fallout from Satyam fraud was severe and bought crises in the company as the fraud was made over Rs.7800 crores which eventually turned to Rs 12,320crores as created by false bank statement,fake invoice and other documents.
In April 2009 Tech Mahindra acquired a stake in Satyam company through a government bidding process, re branded the company as Mahindra Satyam. This helped in restoring some confidence and stabilize operations of the company which lost after the confession of fraud . In 2013, Mahindra Satyam merged with Tech Mahindra, which helped in flourishing the company.
SATYAM SCANDLE- INDIA’S BIGGEST ACCOUNTING FRAUD
The Satyam Computers scam is an example of one of most catastrophic scams of India resulting in shockwaves across the business world and leaving the investors,employers in shock . Ramalinga Raju, the founder and chairman of Satyam Computer Services,confessed to falsifying and manipulating the company’s accounting for many years in January 2009. This confession surprised investors, employers , and regulators and ruins the company’s image not only in Indian business world but globally too.
The Satyam scam was a planned to defraud stakeholders. Raju increased sales, earnings, and cash levels, providing a false sense of financial accomplishment(false bills and invoice), Forging bank statements, faking invoices, and inflating customer numbers were included in the fraudulent operations. It also shows the failure of corporate governance processes and their ignorance.
The results were devastating. Share prices fall down, .The Satyam scandal damaged local and foreign investors’ faith in India’s business sector.
SATYAM SCAM CASE STUDY
Raju started falsifying Satyam company’s financial records in 2003 to depict profit than the company actually gain.
Moreover Raju participated in a web of deception with his brother Rama Raju, Company’s managing director, and a group of top executives and started making fake audit reports and generating fake invoices, clients, bank accounts, and even employees were also made fake. Things were made worse when Raju used Satyam’s finances to invest in his family’s enterprises, such as Maytas, for personal benefit.
Satyam’s stock price jumped from Rs. 10 to Rs. 544, making it one of India’s most valuable IT firms for the country in 2008. The firm got social responsibility and corporate governance awards, as well as the Golden Peacock Award in 2008.
However, the condition started deitoriorating during the end of 2008, coinciding with the global financial crisis, which shattered the image of the IT sector. Raju faced emence pressure from lenders and creditors to settle out his finance as company’s sales and profit started decreasing. The World Bank further examined his behavior and barred Satyam company from participating in its projects for eight years owing to him.
In a effort to save his enterprise, Raju used Satyam’s financial reserves in 2008 December,of approx $1.6 billion offer for Maytas. This strategy, however, backfired results in a furious uproar from Satyam shareholders and board members. Raju had just 12 hours to cancel out the deal, but Satyam Company’s stock price had dropped by then to 55%.
Ultimately Raju admitted to his deceptions when had no choice to do so. On 7 January 2009, he revealed inflating Satyam company’s assets by a Rs. 7,800 crores, for approximately 93%-94% of the company’s assets, in a letter to the company’s Board of Directors and higher authorities. Further, he admitted to overstating Satyam’s revenues by Rs. 5,040 crores, nearly 75%-76% of the company’s revenue. Raju confessed that he worked independently and that neither his auditors nor board members get to know about illegality of his work done.
AFTERMATH SATYAM COMPUTER FRAUD
The Satyam scam was exposed by an anonymous whistleblower who sent email to one of the company’s directors, Krishna Palepu, revealing the fraud. He forwarded the emails to another director and S. Gopalakrishnan, a partner. The emails were sent from the alias Joseph Abraham. The anonymous person also alerted the SEBI and the media about the scam.
After Raju’s confession, new board members were appointed to prevent
the collapse of the system and the Indian government started an immediate investigation and limits the direct participation. SEBI appointed Justice Bharucha, a retired judge to oversee the case of Satyam and instill confidence in the transaction. Tech Mahindra bought Satyam’s company for $1.13 per share.
The investigation stated several criminal cases and the Special Court of Hyderabad in 2015 found the him guilty of cheating, criminal breach of trust, forgery and obstruction of evidence. The Raju brothers were sentenced to 7 years in eviction of Rs. 5 crore each.
CONCLUSION
The Satyam fraud or scam also known as the Satyam scandal, was one of the largest corporate frauds in India’s cooperate world which involves the manipulation of financial accounts done by the company’s chairman Ramalinga Raju.
He admitted to inflating revenues, profits, and cash and balances by falsifying documents and faking bank statements, deceiving investors, regulators, and stakeholders.
The revelation of the fraud had severe consequences. It severely impacted Satyam’s employees,auditors,investors etc.
To stabilize the company, Satyam was eventually acquired by Tech Mahindra, which rebranded it as Mahindra Satyam. The acquisition helped restore confidence in the company and mitigate the fallout from the scandal. Overall, the Satyam fraud shows the importance of ethical conduct, transparency, and vigorous governance in corporate environments, and left a lasting impact on India’s business world and regulatory framework.
FAQ
1. Who was mainly blammed for the Satyam scandle?
Ans: B. Ramalinga Raju, his brother and Satyam’s former managing director; former PwC auditors Gopalakrishnan and T Srinivas. Srinivas and Raju’s other brother are mainely to blame for the Satyam fraud case.
2. What did the chaiman of the Satyam computer service ltd company did?
Ans. The chairman Ramalingam raju confessed that he manipulated company’s financial records,fake bills, invoices etc.
3. Who acquired Satyam after Raju confessed the fraud?
Ans: Satyam company was acquired by Tech Mahindra, an Indian multinational technology company in 2012
4. Why did tech Mahindra acquired the company after the scam was exposed?
Ans: Tech Mahindra, saw the Satyam purchase as an opportunity for diversification and development. Satyam company was of worldwide reach, and renowned customers created a strategic opportunity for Tech Mahindra and the Mahindra Group to expand their company and increase profit.
