comp law satyam case study

8/8/2019 Comp Law Satyam Case Study

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Chetan Aneja 13

Iraj Hussain 21



TheFraud³Fraud means and includes any of the following

acts committed by a party to his contract, or with his connivance, or by his agent, with

intent to deceive another party thereto of his

agent or to induce him to enter into the

contract.´

-Mr. Manoj Sharma

CRM, FDDI.



Fraud Listings

The suggestion, as a fact of that which is nottrue, by one who does not believe it to be true.

The active concealment of the fact by onehaving knowledge or belief of the fact.

A promise made without any intention of performing.

Any other act fitted to deceive. Any such act or omission as the law specially

declares to be fraudulent.

-Mr. Manoj SharmaCRM, FDDI.



The Asatyam

On 7 January 2009, company Chairman Ramalinga Raju resigned after notifying board members and the Securities and Exchange Board of India (SEBI) that Satyam's accounts had been falsified.

Raju confessed that Satyam's balance sheet of 30 September 2008contained:

Inflated figures for cash and bank balances of 5,040 crore (US$1.09 billion) as against 5,361 crore (US$1.16 billion) crore reflected inthe books.

An accrued interest of 376 crore (US$81.59 million) which wasnon-existent.

An understated liability of 1,230 crore (US$266.91 million) onaccount of funds was arranged by himself.

An overstated debtors' position of 490 crore (US$106.33 million)(as against 2,651 crore (US$575.27 million) in the books).

40000 employees as against 53000.

www.wickipedia.org



Raju¶s Satya"What started as a marginal gap between actual operating

profit and the one reflected in the books of accountscontinued to grow over the years. It has attainedunmanageable proportions as the size of company

operations grew significantly (annualised revenue run rateof 11,276 crore (US$2.45 billion) in the September quarter of 2008 and official reserves of 8,392 crore (US$1.82 billion)). As the promoters held a small percentage of equity, the concern was that poor performance would resultin a takeover, thereby exposing the gap. The aborted Maytas

acquisition deal was the last attempt to fill the fictitiousassets with real ones. It was like riding a tiger, not knowinghow to get off without being eaten.´



Why Did Raju DO It

It starts small. Typically, executives do not wake up one morningand say, "I feel like adding 5 billion rupees to our revenue today."They usually start by fudging the number a little--and then it grows.

It is usually a response to competitive pressures. Companies havetargets that they need to reach every month, quarter and year.

The fiddle is easy to rationalize at first. Managers typically haveconfidence in their skills and believe that their company isfundamentally sound. Given that, it's easy to rationalize that whilewe're just a little short on the numbers now, we will make it up inthe future, and nobody will know.

It gets out of control. When the company is unable to make up thegap, a larger distortion is needed to cover it up. This in turn creates pressure to deliver even better results--which leads to bigger cover-ups, and so on.

-Prof essor Sudhak ar (Sid) V. Balachandran

Columbia Business School,

http://www.forbes.com/2009/01/07/satyam-raju-governance-

-



Why Did Raju DO It

On 22 January 2009, CID told in court that the

actual number of employees is only 40,000 and

not 53,000 as reported earlier.

Mr. Raju had been allegedly withdrawing INR

20 crore rupees every month for paying these

13,000 non-existent employees.

Save Taxes.

To achieve Targets.-http://economictimes.indiatimes.com/infotech/

software/Satyam-scam-Did-Raju-launder-cash

-before-lid-lifted/articleshow/5734260.cms



http://www.businessworld.in/index.php/Corporate/The-Satyam-Scandal.htm



Who Suffered ??

Company

± Merrill Lynch now a part of Bank of America and State FarmInsurance terminated its engagement with the company.

± Credit Suisse suspended its coverage of Satyam.

±Satyam was the 2008 winner of the coveted Golden Peacock Award was stripped from them.

The New York Stock Exchange has halted trading in Satyam stock as of 7 January 2009.

India's National Stock Exchange has announced that it will remove Satyam from its Satyam's shares f ell to 11.50 rupees on 10 January

2009, their lowest level since March 1998, compared to a high of 544rupees in 2008.

In New York Stock Exchange Satyam shares peaked in 2008 at US$29.10 by March 2009 they were trading around US $1.80.

Satyam's auditing f irm PricewaterhouseCoopers. SEBI, said if found guilty, its license to work in India may be revoked.



Who Suffered ??

Stock Market.

Investors

± Satyam's shares plummeted on

the news by 75%.

± dragging down India's stock

main market by 7%.

Government.

Promoters.

IT Sector.

Nation Image.-http://www.businessworld.in/index.php/

Corporate/The-Satyam-Scandal.html



The Corporate Veil Of SatyamHas Been Lifted

THANK YOU

comp law satyam case study

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