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8 years later, court finds Satyam’s Raju, 9 others guilty of corporate fraud: All you need to know

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A special court in Hyderabad today convicted former chairman B Ramalinga Raju and other nine accused following a seven-year trial. Sentencing in the case will be pronounced tomorrow ( 10 April, 2015).
The 10 were convicted under various sections of the Indian Penal Code (IPC), including 120B (criminal conspiracy), 409 (criminal breach of trust), 420 (cheating), 467 (forgery of valuable security, will), 468 (forgery for cheating), 471(using forged documents as genuine) and 477-A (falsification of accounts).
Other accused in the case are his brother and the company’s former managing director, B Rama Raju; former chief financial officer Vadlamani Srinivas; former Price Waterhouse auditors S Gopalakrishnan and Srinivas Talluri; B Suryanarayana Raju; former employees G Ramakrishna, D Venkatpathi Raju and Ch Srisailam; and Satyam’s former internal chief auditor VS Prabhakar Gupta.
The scam is known as India’s own Enron, with Hyderabad Satyam Computer Services Chairman confessing to inflating revenues of his company, defrauding investors. The company was later acquired by Tech Mahindra.
Here are a few facts you need to know about the scam:
1) It all started with an non-synergestic acquisition proposal by Satyam Computer. On 16 December 2008, Satyam said that it would buy out two group companies, Maytas Properties and Maytas Infra. Satyam had to abort the move after investors, both doemstic and foreign, objected and pummelled the stock down.
2) On January 7, 2009, B Ramalinga Raju, then chairman of Satyam, admitted to manipulating his company’s account books and inflating profits over many years to the tune of several crores of rupees. In a letter, the company informed the stock exchanges that its chairman has with “deep regret” disclosed that its balance sheet as of September 30, 2008, had a non-existent cash and bank banlances of Rs 5,040 crore, accured interest of Rs 376 crore, an understatedliability of Rs 1230 crore and overstated debtors position of Rs 490 crore. “What started as a marginal gap between actual operatifn profit and the one reflected in the books of accounts continued to grow over the years,” he said. He also said the aborted acquisition attempt of Maytas Properties and Maytas Infra was a last ditch effort to fill the gap.
“Every effort to fill the gap failed,” the letter said, adding “It was like riding a tiger, not knowing how to get off without being eaten.” However, later analysts and other probe agencies picked holes in Raju’s seemingly candid statements of confessions.
3) At the time the scam broke out, the company had 40,000 staff (Raju claimed 53,000), 185 Fortune 500 companies as clients and presence in 66 countries. Ironically, only four months before Raju confessed to the fraud had the companny received the Golden Peacock Global Award for Excellence in Corporate Governance from The World Council for Corporate Governance. The shares of Styam ruled at about Rs 544 in 2008, which fell to Rs 11 or so on 10 January 2009, a day afer Raju confessed to the fraud.
4) The most shocking aspect of the scam was that the company was being audited by one of the Big Four, PwC. It also brought into focus the role of independent directors.
5) After Raju disclosed the manipulation, the government swung into action. It asked the Institute of Chatered Accountants of India and Institute of Company Secretaries of India to probe the role of auditors and company secrataries in the scam. Within two days, the board of Satyam was superseded by the government.
6) The case was transferred to the Central Bureau of Investigation in 2009. In six years, the special court trial judges have marked 3,000 documents and examined 226 witnesses.There are 10 accused in the case. Raju, his brother and Satyam’s former Managing Director B Rama Raju, former Chief Financial Officer Vadlamani Srinivas, former PwC auditors Subramani Gopalakrishnan and T Srinivas, Raju’s another brother B Suryanarayana Raju, former employees G Ramakrishna, D Venkatpathi Raju and Ch Srisailam and Satyam’s former internal chief auditor V S Prabhakar Gupta. They have been charged under various sections of IPC for cheating, criminal conspiracy, forgery and breach of trust.
7) In December 2014, a Hyderabad court sent Raju and his brother Rama Raju to six months in jail, and also imposed a fine of Rs 5 lakh on each of them. Earlier in July 2014, Sebi slapped a 14-year ban on Raju, Rama Raju, Vadlamani Srinivas, former Satytam Vice-President – Finance G Ramakrishna, and former head of internal audit VS Prabhakara Gupta from buying or selling of stocks. They were also asked to disgorge an aggregate Rs 3070 crore as penalty, including 12 percent interest. Investopedia defines disgorgement as “a repayment of ill-gotten gains that is imposed on wrong-doers by the courts”. In January last year, 21 relatives of Ramalinga Raju, including his wife Nandini Raju and sons Teja Raju and Rama Raju were convicted by a Special Court for Economic Offences for default in income tax payment.
8) The court’s verdict is related to the case filed by the CBI. The investigating agency has put the fraud at Rs 14,000 crore, double the amount Raju had confessed to. All the accused are now out on bail.

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