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February 9, 2009

Yet Another Scandal for ‘India’s Enron’ (Satyam Computer Services)

According to FoxNews: “Satyam Computer Services Ltd., the Indian tech giant at the center of a $1 billion executive fraud and a World Bank ethics scandal, is involved in yet another kind of debacle — this time at the United Nations’ public health arm, the World Health Organization (WHO).

At issue is Satyam’s role in the development of a $55.5 million global business management system for WHO, which was slated to become the master control for staffing, financial payments and procurement by the organization by an initial deadline of September 2007.

That deadline has long since passed, and instead, according to documents obtained by FOX News, the project is far behind schedule, wallowing in glitches that have deeply affected WHO operations, and, despite management claims to the contrary, likely to end up far exceeding its budget.

Moreover, according to the documents, in the push to get at least part of the system up and running by last summer, Satyam ignored the instructions of the software’s manufacturer, Oracle, for implementing the complex system; ran user tests that validated the system without “being able to replicate a real-life situation,” provided little or no training to WHO employees; and failed to adequately involve health care professionals who see the system as a vital tool, among a host of other failings.”

January 9, 2009

Satyam’s Computer Services Chairman Arrested , Board Sacked, in Fraud Probe

According to Bloomberg: “Satyam Computer Services Ltd. chairman Ramalinga Raju and his brother Rama were arrested and the remaining directors of the software exporter sacked, as India started investigating an alleged $1 billion fraud.”

“Satyam, India’s fourth-largest software exporter, plunged for a second day in Mumbai trading on concern it may run out of money after Raju said he falsified the accounts “for several years.” The scandal, whose scope is being likened to the 2001 bankruptcy of Enron Corp., has shaken confidence in Indian companies and accounting standards.

“The Satyam case is an aberration,” Prem Chand Gupta, the Corporate Affairs Minister said. “The credibility of the Indian corporate sector in general, and IT sector in particular, should not be allowed to suffer because of this.”, according to BBC

Update (01-10-2009): “The chief financial officer of India’s Satyam Computer Services Ltd. was arrested Saturday, the third person taken into custody in a scandal that began when the company’s chairman admitted inflating profits with “fictitious” assets and non-existent cash.

Company founder B. Ramalinga Raju and his brother, Rama Raju, Satyam’s managing director, were arrested Friday in connection with the scandal. In a letter written to investigators, B. Ramalinga Raju admitted that he and his brother were responsible for cooking the books at Satyam”, according to CNN

Satyam founder B. Ramalinga Raju

Satyam founder B. Ramalinga Raju

Update 2 (01-10-2009): According to Naatmad: “Satyam Computer Services, [..] has said it will take fewer people on board to cut costs due to the unstable global economic environment. The company is planning to hire only 8,000-10,000 people this fiscal as against 15,000 that it had earlier planned to recruit. [..] Around 250 employees were given the pink slip last quarter.”

Update 3 (01-14-2009): According to BusinessStandard (India): Satyam may get full-time directors in a week

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January 7, 2009

European investors unfazed by “India’s Enron” in IT

According to Reuters: “European investors remain upbeat about India despite an accounting scandal at IT company Satyam Computer Services (SATY.BO) that sent Indian markets tumbling on Wednesday.

Shares in the IT group fell almost 80 percent after founder and chairman Ramalinga Raju admitted inflating the company’s reported cash and bank balances by over 50 billion rupees ($1 billion).

While shaken by what has been dubbed “India’s Enron”, some investors say they will wait for signs of widespread malfeasance among Indian companies before deciding whether to change their investment policy on India.”

  • Satyam is the fourth largest of the Indian IT outsourcing firms
  • Satyam serves more than a third of the Fortune 500 companies
  • Satyam’s clients include multinationals such as Nestlé, General Motors (GM), and General Electric (GE)
  • Satyam’s auditor is PricewaterhouseCoopers, who endorsed the company’s accounts

Update: Ramalingam Raju, the chairman of troubled Indian IT outsourcing company Satyam Computer Services, resigned on Jan. 7, 2009, admitting the firm had falsified accounts and assets and inflated its profits over several years.

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