Satyam Scam: Who is to blame?

[fineleg]

Satyam is the biggest fraud in India's corporate history. That the company management, mainly disgraced chairman B Ramalinga Raju, kept everyone -- seemingly -- in the dark for a decade and tarnished shining India's image horribly, is as stupefying a fact as the Rs 7,800 crore (Rs 78 billion) scam itself. The company's account books said that Satyam had over Rs 5,000 crore billion (Rs 50 billion) in the bank, when it did not. Raju said that he had been fudging the account books for 'several years' and despite this no one but he, and his brother, knew of this. And though the two brothers, along with the CFO of the company Srinivas Vadlamani, have been arrested, there aren't many takers for this story. So experts, analysts, corporate honchos, lawyers and professionals are now pointing fingers at various people as being the culprits to this shameful act. So who is guilty in this sordid state of events? Of course, Raju is by far the father of this fraud, but there were others who are also culpable, if not by complicity then by negligence. Reports indicate that more arrests are likely to be made in connection with the Satyam fraud. Let us take a look at the various players in the Satyam fiasco: More on this at: http://specials.rediff.com/money/2009/jan/14slde2-satyam-scam-so-who-is-to-blame.htm

[Rajiv]

Satyam Scam: Who is to blame? Shivam and Sundaram

[Ram]

Who is to blame? Simple - Corporate greed. Raju simply inflated his books to paint a rosy picture about his company, so the stock price will rise, more people will buy his stocks and his wealth will in turn grow. By his own admission, he has been doing it for many years and probably, he first did it when Satyam was quite a small entity and he wanted to jumpstart the stock price. But over the years, as the company grew in strength and revenues, he had no option to continue the fraud, only this time, he had to do it bigger because the company itself had gotten bigger.

[fineleg]

Who is to blame? Simple - Corporate greed. Raju simply inflated his books to paint a rosy picture about his company, so the stock price will rise, more people will buy his stocks and his wealth will in turn grow. By his own admission, he has been doing it for many years and probably, he first did it when Satyam was quite a small entity and he wanted to jumpstart the stock price. But over the years, as the company grew in strength and revenues, he had no option to continue the fraud, only this time, he had to do it bigger because the company itself had gotten bigger.

But, there has to be people who are held accountable, and punished for this. It can't be just Raju - whoever perpetrated this crime actively or by failing to do their job (such as PwC, Board Directors, CFO...) should be held responsible. Raju ofcourse should get the lion's share of the punishment. Govt/Indian SEC - Put in more rules and regulations and monitoring to hopefully minimize such stuff in other companies going forward.

[DomainK]

There are two types of guilty people here: of commission and omission. Those who did it are the big criminals who used the trust of the unsuspecting people. And then there are those who should have been more careful and attentive, who could have detected it if they had been doing their jobs right. The executive directors would fall in that category. In a position like that, you are not supposed to just blindly trust your CEO. It is your job to be aware of whats going on in the company. Possibly some of them knew it all, but turned a blind eye because a. they could not have done anything without exposing their own company and b.it suited them well. A very good number of thugs are sitting also in the auditor's office. Either they are guilty of being a willful party to the act or they are guilty or being too incompetent to catch the fraud. But their job was to ensure that the books were right. Either ways, they are seriously in trouble. There are also quite definitely some employees down the order who are involved. Obviously Raju could not have pulled it off all by himself. Some accountants would definitely have known what was happening. They could always say that they were just following orders, but the Indian law makes it clear: if you know that the orders are illegal and still follow them, you become a party to the crime. These employees will be exposed only if Raju & co expose them.

[fineleg]

Good post Domaink. nicely written. The question is how can we get a speedy and uncorrupt investigation to answer those questions!

[DomainK]

Good post Domaink. nicely written. The question is how can we get a speedy and uncorrupt investigation to answer those questions!

I dont think the investigation will be a difficult one. Its a wide open case at this point of time and a smart investigator would get all the threads quite easily. There will be thousand traces around and most of the people involved would be geniuses in their respective fields of work, but would not be strong enough to sustain a tough session of cross questioning especially when there would be evidence against them. The answers coming from them might be to cover their own backside, but they would eventually give each other up. Ask the same question to five different people in five different rooms and the blame games will begin. Everyone will try to save his own ass and will try to implicate the others to get away. They will expose each other. The auditors will find themselves in serious trouble. They would be the only ones with the burden of proof. With all others, the prosecution will have to prove the guilt (innocent until proven guilty), but in case of the auditors, the defense will have to prove innocence....guilty untill proven otherwise. Financial crimes are typical. Once discovered, the trails become very distinct. They benefit only as long as they are undetected. Once detected, game over.