B Ramalinga Raju got seven years in prison in the Satyam fraud case. Here’s a lowdown of the country’s biggest-ever corporate accounting scandal.
A special CBI court on Thursday (April 9, 2015) sentenced B Ramalinga Raju, his two brothers and seven others to seven years in prison in the Satyam fraud case.
The court also imposed a fine of ₹5 crore on Ramalinga Raju, the Satyam Computer Services Ltd’s founder and former chairman, and his brother B Rama Raju and ₹20-25 lakh each on the remaining accused.
HT presents a lowdown of the country’s biggest-ever .
What is the Satyam scam about?
It is about corporate governance and fraudulent auditing practices allegedly in connivance with auditors and chartered accountants. The company misrepresented its accounts both to its board, stock exchanges, regulators, investors and all other stakeholders.
Is this an accounting fraud, a market manipulation/fraud or both?
Who is to blame here? The promoters?
What about the auditors?
The role of external third party auditors, who were tasked to ensure that no financial bungling is undertaken to carry out promoters’ interest or hide facts, have also been brought to question.
Anatomy of a fraud
1. Maintaining records
· Raju maintained thorough details of the Satyam’s accounts and minutes of meetings since 2002.
· Raju stored records of accounts for the latest year (2008-09) in a computer server called “My Home Hub.”
2. Fake invoices and bills
· Details of accounts from 2002 till January 7, 2009 – the day Raju came out with his dramatic, five-page confession – were stored in two separate Internet Protocol (IP) addresses.
· Fake invoices and bills were created using software applications such as ‘Ontime’ that was used for calculating hours put in by an employee
· A secret programme was allegedly planted in the source code of the official invoice management system creating a user id ‘Super User’ with the power to hide or show the invoices in the system.
3. Web of companies
· A web of 356 investment companies was used to allegedly divert funds from Satyam.
· These companies had several transactions in the form of inter-corporate investments, advances and loans within and among them.
· One such company, with a paid up capital of ₹5 lakh, had made an investment of ₹90.25 crore and received unsecured loans of ₹600 crore.
