Satyam Scam (Group 4)

Presented By-
Gauraw Kumar Singh (08)
Vaibhav Marbate (15)
Gaurav Patil (22)
Swapnil Sawant (31)
Suraj Kiran Mohanty (39)
Suratna Shinkar (41)
 Scam Overview

▪ Satyam Computers – Founder: Ramlinga Raju (1987)

▪ One of the most prominent players in IT
▪ Registered on BSE – 1991
▪ Registered on NYSE – 2001
▪ Boom in Real Estate sector
▪ Satyam Scam – India’s biggest corporate scam (2009)
▪ Monetary value – Approx. 7000 crores

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 Anatomy of Scam

Maintaining Fake Invoices Web of

the Records and Bills Companies

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 Stakeholders Responsible

Investors

Board
Media
Member

PwC Government

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 How Scam Was
Exposed

The Fall of the Market in the Recession of 2008

By September 2008, after nearly 18 months of the sub-prime crisis un raveling,
Lehman's stocks had already taken a beating and its debt had piled up, filling for
bankruptcy on September15, 2008.

▪ This cause depression in real estate share prices which spread globally. Now the
property(real estate) which Mr. B. Ramalinga Raju bought in high prices their prices fall
by half causing tremendous loss for Maytas Infra and Maytas
properties.

▪ The Gap between real figures and inflated figure began to rise and started getting out
of control.

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 Failed Comeback

▪ On December 16, 2008, Satyam Computer Services - announced the acquisition of

Maytas Infra and Maytas Properties, companies related to Mr Raju's family and
controlled by same set of promoters, for around ₹ 7,700 crore.
▪ But the plan backfired and no shareholder approval was sought for the acquisition,
which would have utilized nearly all of Satyam's ₹ 5,500 crore cash.
▪ A lot of chaos was created in the market and it hit Satyam Computer Services share
prices. Shares of the company fell over 30 per cent
▪ Investing DSP Merrill Lynch met market regulator Sebi and said it has found serious
flaws while carrying out a due diligence exercise in Satyam
▪ Mr Raju admitted to over ₹ 7,000 crore accounting fraud, saying Satyam had
overstated profits and falsified assets for years, Confessed by writing letter

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 Consequences of the scam

▪ The auditor of Satyam Computers PwC, was banned by SEBI for 2 years
whereas US stock market regulator SEC imposed a fine of $ 6 million.

▪ In order to avoid Satyam computers from collapsing, the GOI appointed new
board members for the company.

▪ Later, Tech Mahindra in April 2009 bought 51% stakes in Satyam &
transformed it to Mahindra Satyam. Down the line in June 2013, the
Mahindra Satyam got merged with Tech Mahindra.

▪ ED, pressed charges on the Chairman Ramalinga Raju & 47 other individuals
for money laundering followed by seizing of their properties.

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 Consequences of the Scam

▪ SEBI, charged Ramalinga Raju & his family for Insider Trading & ordered them to
return the Rs.1850 crore profit with an interest of 12%. A 14 year ban on dealing in
the Security Market was even imposed.

▪ On 10th April 2015, the special CBI court sentenced Ramalinga Raju, Suryanarayana
Raju, the then CFO Srinivas Vadlamani, two PwC partners and five other people to 7
years of rigorous imprisonment, coupled with a fine of Rs. 5.5 crores.

▪ On 9th January 2009, Satyam stock was removed from Sensex & Nifty.

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 How it could have been avoided

There are some functional body if they would have work properly this scam could be avoided .
▪ INVESTOR
❑ Investor play important role in detecting financial position of a company.
❑ Investor must insure that the share value which is listed is genuine and as per its financial
status.
❑ Information about the company should be latest from trusted source , easily accessible
and correct.

▪ BOARD
❑ Must monitor the ethical policies and the way they are being maintained in the company.
❑ No to inactive board members and authority to independent board of directors.
❑ Clear understanding of responsibility between the board and next level employees.
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 How it could have been avoided

▪ GOVERNMENT INTERVENTION
❑ Government should always plays an active role in the company affairs
because the company runs with the public money.
❑ The government must frequently check the company’s performance in the
market and take necessary steps in curtailing any malpractices.
❑ Government is not taking any corrective measures in case of any violations.
▪ ACCOUNTING STANDARDS
❑ Auditors main responsibility is to check fairness and trueness of financial
statements.
❑ Reputation of auditing firm can’t avoid scandals.
❑ Most of the companies involved in mega scandals were audited by reputed
auditing firms.
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Thank You