Nothing New with the Satyam Scandal

The announcement by the Chairman and Promoter of Satayam Computer Systems, Ramalinga Raju, that he inflated the income of the company by about Rs.7000 crores (about US $ 1.5 billion) in the last seven years has made a corporate story in India. Every day new revelations appear in the TV and print media. The Government of India has dissolved the Board of the company and installed a new one with a mandate to revive the company, which was (and perhaps is) the fourth largest IT company in India. It now transpires that it is possible that the money was in fact received and siphoned off for other activities of the Chairman and his family, like the Real Estate business etc. Ramalinga Raju and his brother (who was the Managing Director of the company before the scandal broke out) are in jail now. Questions are asked about the way statutory financial audits were conducted by Price Waterhouse Cooper, an international auditing firm; there is also a suggestion that PWC is hand-in-glove with the Management in committing the fraud. Quite a few Chartered Accountants have expressed their doubt as to how Ramalinga Raju could have defrauded the company with all the controls in place.

This fraud is nothing new; see the case of Adelphia below; you cannot but admire the close resemblence between the two frauds.
(the following was extracted from:https://www.zicklincenter.org/links/index.htm#scandals)


"Adelphia Fraud Information

Adelphia Communications Corp.

By 2002, Adelphia had built itself into the sixth largest cable operator in the United States under the direction of founder John Rigas. The company was delivering cable television and local telephone service to thirty-two states and Puerto Rico. But in March of that year, the company was forced to admit that it had failed to report several billion dollars in debt. This debt was believed to have been tied in large part to insider deals conducted by John Rigas and his family, several of whom held key executive positions at the company. The Rigases quickly left the company, although they, along with several other company executives, have since been charged with criminal and civil offenses. Meanwhile, the company watched its share value plummet until they filed for bankruptcy in June 2002.

How did Adelphia defraud the public?

Adelphia, under the direction of the deposed executives, is alleged to have:

· Inflated reports of company earnings and subscribers
· Failed to sufficiently report unpaid company debts
· Concealed the Rigases’ use of company funds for stock purchases, real estate procurement, and other deals

It is also believed that the company was used to leverage personal loans for executives.

What charges have been filed?

Criminal charges have been filed against John Rigas, sons Timothy and Michael Rigas (who held, respectively, the positions of chief financial officer and executive vice president of operations), former vice president of finance James Brown, and former assistant treasurer Michael Mulcahey. Charges against each included sixteen counts of securities fraud, five counts of wire fraud, two counts of bank fraud, and one of conspiracy.

The SEC filed civil charges against the same executives as well as another of John Rigas’s sons, James Rigas, and Adelphia itself. The defendants are charged with violating antifraud, periodic reporting, record keeping, and internal control laws.

There have also been 44 individual civil suits filed against the former Adelphia executives."


I am a little upset :(. Even in committing a fraud these guys (Rajus) are not the first - they just copied - or cut and pasted !!!
 
G

Guest

Being an ex-Satyam employee I am really disgusted on what has been done by the Rajus. I had put half a decade in the company and everything seemed to be on a roll (an insider view). The employees were high-perfoming and highly motivated and apart from the senior management (which was ALL in the FAMILY) none really knew about the fraud.

I sincerely wonder whether it was a direct CUT-COPY-PASTE job, there are a few very innovative ways in which the squandering of money was done and pretty different than the Rigas' legacy. The effort to write down new piece of code to hack peoples' money was definitely original - though there were some re-usable components/best practices used from other sources and in the end it boiled down to one word - FRAUD - that is where the similarity lies.

According to the public a hacker is a hacker - and each one has his or her own way of hacking if it was cut-copy-paste it would have been discovered at some stage earlier before so much damage was done.

Nonetheless - lesson learnt by the goverment and the ones currently doing it to mend and find better ways of NOT GETTING CAUGHT.

Very interesting read your BLOG Doc.

Regards - Amit
 
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