When Ramalinga Raju, a man who has been in the corporate world for 20 years tried to push Maytas deal, I suspected something is fishy. Finally the cat is out of the bag.
He has revealed the Satya (truth) about Satyam at least for once.
“Sorry I have been cheating you all these years. Today I couldn’t do it anymore as it has reached an unmanageable proportion. I have been cooking up books all the while and its one damn lie. Accounts have been fudged and there is no cash at all.”
We have seen stock market scams but corporate fraud of this proportion is unheard of in India. Yesterday was one of the nightmarish days in corporate India.
This will have a terrible impact on the IT sector in particular and Indian economy in general. Think about an investment banker sitting in New York who wants to invest money. He will be telling himself, “I can’t believe these numbers anymore. Let me not get tricked by these figures and trapped into unwanted scandalous circumstances. It’s only for the good to avoid this market”. Investor community will de-rate our market like what has happened to the Russian market. This fraud will have ramifications on investor confidence.
A person like Ramalinga Raju, who founded Satyam and took it to such heights and one who is considered a local hero has become a zero today. As a common man today I am forced to think twice before believing in any individual’s credentials and integrity.
Share holders and employees are the worst hit in this fiasco. Satyam is an F & O scrip and yesterday morning it was at Rs 116 and by afternoon it reached Rs 50.
The stakeholders, especially LIC and Fidelity who hold more than 5% of stake each (more than promoters’ stock), should take up the battle against the Satyam management. It’s good that Maytas deal didn’t go through as it would have given opportunity for Raju to transfer non existing cash to Maytas and continue with the Satyam drama.
This brings into light the role of other partners in crime – the audit firm PWC and the independent directors.
For 6 years PWC has been auditing Satyam’s books and didn’t even check the bank and cash balances of the company. We think that the big 5 audit firms do a great job. Enron debacle proved it wrong. And now Satyam fiasco has confirmed that these top 5 audit firms are as immoral as any other crooked auditing firms.
Also this raises questions about the role of Independent directors. They are supposed to be independent and ask the right questions and oversee that the objectives of the firm are met. All the independent directors are highly reputed and they didn’t even bother to check the balance sheet even once. I strongly believe that they are also aware of this. 5000 crores is not a small amount that can be withdrawn from the bank and get away without anyone’s knowledge. What is more surprising is that no one has even asked for the CFO without whose knowledge this could have happened.
To restore faith in investors and investment community all the directors should be arrested immediately and put behind bars; their assets confiscated.
I fear that there are other companies that are hiding skeletons and the appropriate actions taken now should send a strong message to them that frauds of this nature will not be taken for granted.
When issues like these come to light everyone remembers and recollects the phrase ‘Corporate Governance’ Most of the time it has remained a seminar topic and not a real life practice. Government and Institute of CA’s should come out with a concrete course of action to prevent this kind of frauds in future and take measures to implement corporate governance rules.