goose Posted January 7, 2009 Posted January 7, 2009 a 'good' time for other Indian companies to get some bad news out so markets could come under pressure.
fineleg Posted January 7, 2009 Posted January 7, 2009 The letter by Ramalinga Raju: Even the Chairman saying "fictitious assets"! To the Board of Directors, Satyam Computer Services Ltd. Dear Board Members, It is with deep regret, at tremendous burden that I am carrying on my conscience, that I would like to bring the following facts to your notice: The Balance Sheet carries as of September 30, 2008 Inflated (non-existent) cash and bank balances of Rs.5,040 crore (as against Rs. 5361 crore reflected in the books) An accrued interest of Rs. 376 crore which is non-existent An understated liability of Rs. 1,230 crore on account of funds arranged by me An over stated debtors position of Rs. 490 crore (as against Rs. 2651 [cr.] reflected in the books) For the September quarter (02) we reported a revenue of Rs.2,700 crore and an operating margin of Rs. 649 crore (24% Of revenues) as against the actual revenues of Rs. 2,112 crore and an actual operating margin of Rs. 61 Crore ( 3% of revenues). This has resulted in artificial, cash and bank balances going up by Rs. 588 crore in Q2 alone. The gap in the Balance Sheet has arisen purely on account of inflated profits over a period of last several years (limited only to Satyam standalone, books of subsidiaries reflecting true performance). What started as a marginal gap between actual operating profit and the one reflected in the books of accounts continued to grow over the years. It has attained unmanageable proportions as the size of company operations grew significantly (annualized revenue run rate of Rs. 11,276 crore in the September quarter, 2008 and official reserves of Rs. 8,392 crore). The differential in the real profits and the one reflected in the books was further accentuated by the fact that the company had to carry additional resources and assets to justify higher level of operations — thereby significantly increasing the costs. Every attempt made to eliminate the gap failed. As the promoters held a small percentage of equity, the concern was that poor performance would result in a take-over; thereby exposing the gap. It was like riding a tiger, not knowing how to get off without being eaten. The aborted Maytas acquisition deal was the last attempt to fill the fictitious assets with real ones. Maytas’ investors were convinced that this is a good divestment opportunity and a strategic fit. Once Satyam’s problem was solved, it was hoped that Maytas’ payments can be delayed. But that was not to be. What followed in the last several days is common knowledge. I would like the Board to know: 1. That neither myself, nor the Managing Director (including our spouses) sold any shares in the last eight years — excepting for a small proportion declared and sold for philanthropic purposes. 2. That in the last two years a net amount of Rs. 1,230 crore was arranged to Satyam (not reflected in the books of Satyam) to keep the operations going by resorting to pledging all the promoter shares and raising funds from known sources by giving all kinds of assurances (Statement enclosed, only to the members of the board). Significant dividend payments, acquisitions, capital expenditure to provide for growth did not help matters. Every attempt was made to keep the wheel moving and to ensure prompt payment of salaries to the associates. The last straw was the selling of most of the pledged shares by the lenders on account of margin triggers. 3. That neither me, nor the Managing Director took even one rupee/dollar from the company and have not benefited in financial terms on account of the inflated results. 4. None of the board members, past or present, had any knowledge of the situation in which the company is placed. Even business leaders and senior executives in the company, such as, Ram Mynampati, Subu D, T.R. Anand, Keshab Panda, Virender Agarwal, A.S. Murthy, Han T, SV Krishnan, Vijay Prasad, Manish Mehta, Murali V. Sriram Papani, Kavale, Joe Lagioia, Ravindra Penumetsa, Jayaraman and Prabhakar Gupta are unaware of the real situation as against the books of accounts. None of my or Managing Director’s immediate or extended family members has any idea about these issues. Having put these facts before you, I leave it to the wisdom of the board to take the matters forward. However, I am also taking the liberty to recommend the following steps: 1. A Task Force has been formed in the last few days to address the situation arising but of the failed Maytas acquisition attempt. This consists of some of the most accomplished leaders of Satyam; Subu D, T.R. Anand, Keshab Panda and Virender Agarwal , representing business functions; and A.S. Murthy, Han T and Murali V representing support functions. I suggest that Ram Mynampà ti be made the Chairman of this Task Force to immediately address some of the operational matters on hand. Ram can also act as an interim CEO reporting to the board. 2. Merrill Lynch can be entrusted with the task of quickly exploring some Merger opportunities. 3. You may have a testatement of accounts’ prepared by the auditors in light of the facts that.I have placed before you. I have promoted and have been associated with Satyam for well over twenty years now I have seen it grow from few people to 53,000 people, with 185 Fortune 500 companies as customers and operations in 66 countries. Satyam has established an excellent leadership and competency base at all levels. I sincerely apologize to all Satyamites and stakeholders, who have made Satyam a special organization, for the current situation. I am confident they will stand by the company in this hour of crisis. In light of the above, I fervently appeal to the board to hold together to take some important steps Mr T R Prasad is well placed to mobilize support from the government at this crucial time. With the hope that members of the Task Force arid the financial advisor, Merrill Lynch (now Bank of America) will stand by the company at this crucial hour, I am marking copies of this statement to them as well. Under the circumstances, I am tendering my resignation as the chairman of Satyam and shall continue in this position only till such time the current board is expanded. My continuance is just to ensure enhancement of the board over the next several days or as early as possible. I am now prepared to subject myself to the laws of the land and face consequences thereof. (B. Ramalinga Raju) Copies marked to: 1. Chairman SEBI 2. Stock Exchanges
fineleg Posted January 7, 2009 Posted January 7, 2009 Price Waterhouse Coopers is the accounting firm. Will there be a lawsuit against PwC in India or USA? Is this a major shakeup for PwC as well?
fineleg Posted January 7, 2009 Posted January 7, 2009 Price Waterhouse Coopers: The biggest question mark on the Satyam fraud is how a Sensex-30 company carried a non-existent cash reserve of Rs 5,040 crore on its balance sheet that passed muster with all regulatory bodies, in India and abroad, and was certified correct by its audit firm—Price Waterhouse, the Indian arm of PricewaterhouseCoopers (PwC). Records show fictitious accruals remained on the books of Satyam Computer Services Ltd for years. The company’s balance sheet showed reserves and surplus of Rs 2,517 crore in March 2004. That sum rose to Rs 7,221 crore by March 2008. But corporate law practice professionals like Namrata Mehta are sure that it would be difficult for shareholders or any other stakeholder to act against the auditors under the Indian Law of Contract. On its part, Price Waterhouse issued a cryptic statement late in the evening, saying, “We have learnt of the disclosure made by the chairman of Satyam Computer Services and are currently examining the contents of the statement. We are not commenting further on this subject due to issues of client confidentiality.”
fineleg Posted January 7, 2009 Posted January 7, 2009 Noose tightens around PwC The Institute of Chartered Accountants of India (ICAI) — the regulatory body for CAs in the country — has suo motu initiated disciplinary proceedings against the Indian arm of global auditing firm Price Waterhouse, the auditors for Satyam Computer Services. Meanwhile, shocked at the audacity of the Satyam management team to have successfully pulled off a fraud of such magnitude, corporate affairs minister Premchand Gupta today said: “No leniency will be shown towards those who have been found guilty in the fraud committed at Satyam.” The ministry said it would refer the case to the Serious Fraud Investigation Office (SFIO). “The case will definitely be referred to SFIO. It is a serious fraud... now all the agencies like stock exchanges, Sebi, Company Law Board and Registrar of Companies should make a coordinated effort,” a senior official from the ministry of corporate affairs said. The ministry has given the RoC a deadline of January 14 for submitting a report on Ramalinga Raju’s statement today. The company’s chairman admitted that the company’s books were fudged.
DomainK Posted January 8, 2009 Posted January 8, 2009 Unfortunately a few innocent people on the board will be jailed in this.
DomainK Posted January 8, 2009 Posted January 8, 2009 A US law firm has filed class action law suit against Satyam. That could be the beginning of the end. The compensations may far accede the assets. End of game.
fineleg Posted January 9, 2009 Posted January 9, 2009 From the Hindu newspaper: HYDERABAD: The developments in Satyam have baffled colleges and students who saw Satyam as a path to realise their dreams. They are totally shocked that such a reputed firm has resorted to fraudulent methods and feel that its impact will be huge on the mindset of students looking for career in the IT sector. “It came as a huge shock since Ramalinga Raju was more respected among the student circles than any politician or a film star simply because he has paved the path of IT progress in the State,” said Arun Reddy of Sri Indu Engineering College in Ibrahimpatnam. “We were all proud that such a big name in the IT industry across the world came from Hyderabad,” said Priya, who just completed her B.Tech. However, their affinity towards the company was more because it belonged to a Telugu man than its HR practices. Interestingly, Satyam had a relatively negative image for the recruitment practices of its HR wing and placement officers of several engineering colleges vouch for this. “My students would always put Satyam below Infosys, TCS, Cognizant and Wipro,” says V. Uma Maheshwar, Placement Officer of Osmania University College of Engineering. He says their HR practices were not dynamic and senior students seldom passed a positive image to their juniors. The placement officer of CBIT, N.L.N. Reddy, too agrees. “Their recruitment process is not professional like other companies,” he says adding that they had not visited popular colleges like OUCE, JNTU Hyderabad, CBIT and Vasavi in the last two years. “Their HR manager was not even aware of a popular college like CBIT and it reflects how the HR wing functioned there.” Dr. Reddy says Cognizant was one of the most respected and preferred companies as they didn’t dishonour their offer letters even during the IT bubble burst. No positive image Some employees of Satyam too agreed that they rarely gave positive image of the company when their juniors in the college sought advice. “Bench periods in Satyam were longer than other companies,” said an employee recruited three years ago. Despite the unfortunate developments students and colleges want Satyam to be back on track simply because it is identified with Telugus’ pride across the globe.
Ram Posted January 9, 2009 Posted January 9, 2009 :haha: Sweet Irony, I got recruited in Satyam during the third year of my engg... Never joined though.. Good job! :D
Ram Posted January 9, 2009 Posted January 9, 2009 Man, they're in serious sh!t... Pretty sure they will soon face a liquidity crisis, as creditors either pull the plug on some of the loans or increase the interest rates on the exisiting ones. But beyond that, they will lose many marquee contracts ( think they're the official IT guts of the Euro 2010 tournament or something) coz lets be honest, which respected global company would want to do business with a tainted Indian outsourcing firm? That will further impact their earnings, which will againm worsen their credit problem. To make it worse, there's this whole question of lawsuits by other companies, which may cost them 100s of millions of dollars. Pretty sure they will be some limited lay-offs ( 4000 - 6000 workers), apart from a temporary freeze on recruitment.
DomainK Posted January 9, 2009 Posted January 9, 2009 Man, they're in serious sh!t... Pretty sure they will soon face a liquidity crisis, as creditors either pull the plug on some of the loans or increase the interest rates on the exisiting ones. But beyond that, they will lose many marquee contracts ( think they're the official IT guts of the Euro 2010 tournament or something) coz lets be honest, which respected global company would want to do business with a tainted Indian outsourcing firm? That will further impact their earnings, which will againm worsen their credit problem. To make it worse, there's this whole question of lawsuits by other companies, which may cost them 100s of millions of dollars. Pretty sure they will be some limited lay-offs ( 4000 - 6000 workers), apart from a temporary freeze on recruitment. The earnings will drop by 60-70% immediately. There will be huge litigation expenses. There will be obscene compensations and claims even in out of court settlements - the US law firms will eat up Satyam for breakfast. Mass litigation happens on a different level there. Some key officials might just find another job. This is the **** they can not get out of. Best solution would be to liquidate and pay off the creditors and then await the jail terms.
gs Posted January 9, 2009 Posted January 9, 2009 The earnings will drop by 60-70% immediately. There will be huge litigation expenses. There will be obscene compensations and claims even in out of court settlements - the US law firms will eat up Satyam for breakfast. Mass litigation happens on a different level there. Some key officials might just find another job. This is the **** they can not get out of. Best solution would be to liquidate and pay off the creditors and then await the jail terms. Why liquidate when they can file for chapter 11 in the US? Once declared bankrupt, their creditors cant touch them. Not sure if they can wriggle out of a jail term though.
DomainK Posted January 9, 2009 Posted January 9, 2009 Why liquidate when they can file for chapter 11 in the US? Once declared bankrupt' date=' their creditors cant touch them. Not sure if they can wriggle out of a jail term though.[/quote'] Not so sure about the US law, but to go bankrupt, you have to prove it to the court that your liabilities far accede your assets and that future earnings are not going to cover the gap so easily. Then the court orders an inquiry to find out if there was any fraud involved i.e if the bankruptcy was filed as a plan to dupe the creditors. A company can however go for a liquidation at anytime and if in the process of the evaluations, the court finds that liabilities are more than assets, the company is declared bankrupt and creditors are paid off proportionately.
Ram Posted January 11, 2009 Posted January 11, 2009 The earnings will drop by 60-70% immediately. There will be huge litigation expenses. There will be obscene compensations and claims even in out of court settlements - the US law firms will eat up Satyam for breakfast. Mass litigation happens on a different level there. Some key officials might just find another job. This is the **** they can not get out of. Best solution would be to liquidate and pay off the creditors and then await the jail terms. Dude, its not as bad as you're making it out to be. Why would they have to liquidate? Companies have fudged their finances before and gone on to survive.. And educate me on this here.. Which US law firms do you think are going to file lawsuits against Satyam and for what purpose? Besides, even if the lawsuits are filed, those cases can go for years.. As far as I can see, Satyam's biggest problem is a) keeping its current clientele b) Getting new ones c) Getting cheap credit. Their credit ratings would have been damaged badly with this fiasco. They may see some temporary job losses, but the company, as an entity, should survive.
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