Tuesday, March 24, 2009

Satyam saga gets murkier

Posted by Mark Sutton on 24 March 2009 at 11:35 UAE time.

Investigators into the Satyam fraud have reportedly said that they now believe the amount involved to be closer to $2 billion, rather than the $1 billion originally that chairman Ramalinga Raju had actually confessed to stealing. They also say that they have uncovered more than 7,000 fake customer invoices and other documents related to the fraud.

Given the sheer level of the fraud, and the complex web of companies that appear to have been used to syphon off funds from Satyam, its a wonder no-one thought to question the amount that Raju admitted to taking before now - and the assertion that his family didn’t benefit from the fraud looks laughable, if only this were a laughing matter.

The news couldn’t have come at a worse time for Satyam, as it moves into the next stage of trying to find a buyer to rescue it. The company is due to shortlist bidders from six that have so far registered, and it desperately needs to get the stability of a new majority shareholder to help stabilize it. Already more customers, including the US Selective Insurance Group, have stated their intention to ditch Satyam. The Economic Times reports that 46 Satyam customers including Applied Materials, Kansas State Bank, Telstra, Emerson, Nissan, State Farm Insurance and Sony have all either dropped Satyam or are in the process of moving work elsewhere.

The full extent of this fraud needs to be uncovered, particularly the role of the auditors, and the people responsible must be punished. But it does seem that Satyam as an ongoing concern viable business, and the interest of so many bidders would seem to suggest it’s seen as viable, is becoming irreversibly damaged by these revelations. For buyers to continue with the bidding process when the extent of the fraud is only just becoming apparent would seem to be irresponsible - yet unless Satyam gets some sort of stability, the list of ex-customers is just going to get longer.

The Indian government has so far kept a light touch on the rescue process - now would seem to be the time for it to step in and provide more support and stability to Satyam, to safeguard jobs and the reputation of the outsourcing industry.

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