1. WHITE COLLAR CRIMES WITH SPECIAL REFERENCE TO
“SATYAM SCAM”

3. “SATYAM COMPUTER SERVICE LIMITED”
•Satyam Computer Services Limited was founded in
1987 by Mr. B Ramalinga Raju.
•The company offers consulting and information
technology services spanning various sectors,
including engineering and product development,
supply chain management, client relationship
management, business process management and
business intelligence.

4. • The company was listed with New York stock
exchange, National stock exchange, and the
Mumbai stock exchange. In June 2009, the company
unveiled its new brand identity “Mahindra Satyam”

5. Who is B. Ramalinga Raju?
• Ramalinga Raju was born on September 16, 1954.
A traditional agricultural family of the KSHATRIYA
(RAJU) Community of Andhra Pradesh.
• He founded Satyam Computers and was its
Chairman until January 7, 2009 when he resigned
from the Satyam board after admitting to corporate
fraud.

6. • Satyam was until recently perceived to be amongst
the top Indian IT vendors.
• Raju has admitted to overstating the company's
cash reserves by USD$ 1.5 billion. Later, a person
involved in the investigation of the company said
that the company's assets were not inflated, but
instead siphoned off by Ramalinga Raju.
• Raju is currently held in Hyderabad's Chanchalguda
jail on criminal charges including fraud, forgery,
cheating, embezzlement and insider trading.

7. “Career of B. Ramalinga Raju”
• He was first businessman in the field of
construction and textiles.
• Raju founded Satyam in 1987.
• He started an satyam computers with 20 employees
in 1987.
• Satyam was listed in INDIAN STOCK EXCHANGE in
1991.
• Listed in NEW YORK STOCK EXCHANGE in 2001.
• Satyam was listed in UNESCO(amsterdum) in 2008.
• There were 52000 employees working in Satyam in
september 2008

9. “Awards”
• Ernst & Young Entrepreneur of the Year Services
Award 1999.
• Dataquest IT Man of the Year Award 2000
• Asia Business Leader Award 2002
• Ernst & Young Entrepreneur of the Year 2007
(revoked after the fraud was confessed)
• Golden Peacock Award for Corporate Governance
2008 (revoked after the fraud was confessed)
• Employees spread over many countries

10. “The Entire Story”
• Ramalinga Raju founded Satyam Computers in 1987
and was its Chairman until January 7, 2009 when he
resigned from the Satyam board after admitting to
cheating six million shareholders.
• After being held in Hyderabad's Chanchalguda jail
on charges including cheating, embezzlement and
insider trading,
• Raju was granted bail on 25.3.2011. Raju was
granted bail on condition that he should report to
the local police station once a day and that he
shouldn't attempt to tamper with the current
evidence

11. • A botched acquisition attempt involving Maytas in
December 2008 led to a plunge in the share price of
Satyam.
• In January 2009, Raju indicated that Satyam's
accounts had been falsified over a number of years.
• He admitted to an accounting dupery to the tune of
7000 crore rupees or 1.5 Billion US Dollars and
resigned from the Satyam board on January 7,
2009.

12. What crime he has constituted?
1. Raju and his brother, B Rama Raju, were arrested by
the Andhra Pradesh police on charges of breach of
trust, conspiracy, cheating, falsification of records.
2. Raju has mislead various investors.
3. Raju had also used dummy accounts to trade in
Satyam's shares.
4. He has violated the insider trading norm.
5. Funds from Satyam were diverted to Maytas
6. On 22 January 2009, CID told in court that the actual
number of employees is only 40,000 and not 53,000
as reported earlier and that Mr. Raju had been
allegedly withdrawing INR 20 crore rupees every
month for paying these 13,000 non-existent
employees.

13. • In Venture Global Engineering vs Satyam Computer
Services Ltd 2010 (8) SCC 660 On being questioned
by criminal investigation department of the Andhra
Pradesh police, Mr. Raju reportedly admitted to
using Satyam (respondent no.1) money for buying
prime land in and around Hyderabad.
• Ten Imaginary fixed deposits Raju admitted that
Satyam’s fixed deposits which supposedly grew
from Rs. 3.35 crore in 1998-99 to a massive Rs.
3320.19 crore in 2007-08 are all fake.

14. Reasons for Satyam Scam:-
1. Raju wanted to take over his MAYTAS INFRA and
MAYTAS PROPERTIES.(company of his sons).
2. He was blamed that he was using the funds of the
investors for the family business.
3. World bank had banned the satyam to take any
services for 8 years (due to illegal profit and lack of
essential document).

15. “Society’s Reaction”
• The people of his native village, Garagaparru, hail the
development works undertaken by the Raju Foundation,
the charitable arm of Satyam.
• The Citizens for a Better Public Transport in Hyderabad
(CBPTH) demanded a CBI inquiry into the process of how
Maytas bagged the Hyderabad Metro Rail project.
• Analysts in India have termed the Satyam scandal India's
own Enron scandal.
• Some social commentators see it more as a part of a
broader problem relating to India's caste-based, family-
owned corporate environment.

16. HOW THIS SCAM HAS RELATION WITH
“MAYTAS”
• Maytas refers to a group of companies founded by
B. Ramalinga Raju. It includes Maytas Properties
and Maytas Infra Limited.
• A property development company founded in 2005.
• Maytas Infra Limited: An infrastructure
development, construction and project
management company. Maytas Infra was originally
run by Satyam Computer Services founder B
Ramalinga Raju.

17. • It came under the scanner due to its association
with B. Ramalinga Raju.
• Various agencies, including the state Crime
Investigation Department, probed the Maytas affair
after B Ramalinga Raju admitted to serious financial
scam in Satyam Computer.
• There were allegations that funds from Satyam
were diverted to Maytas, causing the Government
agencies to verify the infrastructure company’s
records as well. .

18. • In August 2009, Infrastructure Leasing & Financial
Services replaced B Ramalinga Raju as promoter of
Maytas Infra.
• Turning point:- In wake of the Satyam scam, the
Citizens for a Better Public Transport in Hyderabad
(CBPTH) demanded a CBI inquiry into the process of
how Maytas bagged the Hyderabad Metro Rail
project.
• The CBPTH convener C Ramachandraiah alleged
that the state government had been favouring
Maytas for infrastructure projects.
• The Andhra Pradesh government has had paid Rs.
1,800 crore to Maytas Infra towards works under
the irrigation department's Jalayagnam project.

19. • On 8.7.2009 the state government of Andhra
Pradesh forced to end its unprecedented generosity
and cancel the concession agreement with the
group on the Rs 12,132-crore Hyderabad Metro Rail
project.
• On July 21, 2009, a case was registered against the
promoters of the company by the Hyderabad police
under Section 406 (breach of trust) and Section 420
(cheating) of the Indian Penal Code

20. “CONSEQUENCES”
• Before the scandal it’s share price was Rs 300 in
oct 2008. Just after this scandal the share price go
down to Rs 6.30.
• On 10 January 2009, the Company Law Board
decided to bar the current board of Satyam from
functioning.
• Bank of America and State Farm Insurance
terminated its engagement with the company.
• Credit Suisse suspended its coverage of Satyam.
The Credit Suisse Group AG (SIX: CSGN, NYSE: CS)
is a Swiss multinational financial services company
headquartered in Zurich, Switzerland.

21. • SEBI, the stock market regulator, also said that, if
found guilty, its license to work in India may be
revoked.
• The New York Stock Exchange has halted trading in
Satyam stock
• India's National Stock Exchange has announced that
it will remove Satyam from its S&P CNX Nifty 50-
share index.
• Satyam's shares fell to 11.50 rupees on 10 January
2009, their lowest level since March 1998,
compared to a high of 544 rupees in 2008.

22. • Satyam was the 2008 winner of the coveted Golden
Peacock Award for Corporate Governance under
Risk Management and Compliance Issues, which
was stripped from them in the aftermath of the
scandal.
• Present time it’s share price is 107.89. Mahendra
Satyam’s market growth is 7,800crore.
• Before the scandal Satyam was the 4th ranked
among IT companies of India and on 9th jan2009 it
became least valuable IT company in India.

23. “IMPACT OF SATYAM SCAM ON INDIAN ECONOMY”
• Although several companies are trying to have a
bite into Satyam Computers, according to Gartner
study, the company is likely to exist in its current
form. It is expected to discontinue some of its
businesses, service lines or cease to exist in certain
geographies.
• Huge losses to investors aside, the Satyam scandal
has caused “serious damage” to India Inc’s
reputation as well as the country’s regulatory
authorities outside.

24. • The Government certainly cannot remain aloof and
allow Satyam to die off especially when it provides
occupation to 53,000 odd people and indirectly
supports more than a million Indians.
• The Satyam scam effect has started its infectious
presence. U.S. listed stocks of other Indian
companies have started taken a severe beating.
• Indian firms are looking into methods to avoid
scenarios of such scams within their companies.

25. Who is Auditor?
 An Auditor, first and foremost has to be a Chartered
Accountant under the Chartered Accountants Act, 1949.
 He is the person appointed to examine the books of account
and the accounts of a company registered under the
Companies Act, and to report upon them to the company’s
shareholders.
 Audit means the examination or assessment of a company’s
annual accounts, i.e. a balance sheet, profit and loss account
and other financial statements as required by law.
 Under the Companies Act, an auditor is required to express
an opinion as to whether the annual accounts give a true and
fair view of the company’s state of affairs and financial
position. To formulate such an opinion, the auditor needs to
examine the company’s internal accounting system, inspect
its assets, test-check of accounting transactions.

26. Role of auditors, in light of Satyam scam
This fraud was not committed overnight; it was
building up continuously from over years. The role
of Satyam’s auditors is under scanner. They ignored
some of the obvious indications of embezzlement
and thus failed to catch on the massive scam, which
could have been caught much before it acquired the
‘massive’ status.

27. “Decrease in holdings”
1. The holdings of Raju and his family decreased from
15.67% in 2005-06 to 8.61% in September 2008 and
finally, early this year to a meagre 2.3% without
anybody noticing. Further, in 2006, he transferred
these shares to his family’s company, SRSR Holdings
Pvt. Ltd. from which he took out loan using his shares
as collateral.
2. Further, an enormous amount of Rs.4462 crore was
lying unused in its current account. This amount was
neither distributed among shareholders in the shape
of dividend, nor was it used to earn valuable interest,
as it is usually done. But neither independent board
members, nor the auditors seemed to question this.

28. 3. Ten Imaginary fixed deposits Raju admitted that
Satyam’s fixed deposits which supposedly grew
from Rs. 3.35 crore in 1998-99 to a massive Rs.
3320.19 crore in 2007-08 are all fake.
 The auditors are supposed to have an
independent bank confirmation of such things in
the form of a bank statement and should have
obtained certificates from the banks on the tax
deducted on the interest accruing on the fixed
deposits.

29. Undisclosed pledges
• Satyam also procured a loan of about Rs. 1230 crore
without appropriate disclosure. It wasn’t as if no
one was ever suspicious of Satyam’s dodgy
numbers. It was accused of tax fraud and insider
trading back in 2003. However, the company police-
including the auditors seemed to ignore the
accusations.

30. HOW THESE SCAMS CAN BE CONTROLLED
• In addition to the present statutory requirement, companies
should be required to institute sufficient internal
management controls.
• Management should ensure that the internal audit staffs are
able to prevent and detect financial statement fraud.
• Companies whose shares are publicly traded should be
required to have audit committees to monitor the internal
control system and provide important links to the internal
audit staff.
• Sanctions against the perpetrators of financial statement
fraud should be increased by imposing fines and other
deterrent measures like barring from corporate office.
However, in this case, there is a need to prevent innocent
managers from being too risk averse.

31. • There is a need to clarify the duties of external
auditors.
• The management should formulate appropriate
policies and procedures which would reduce such
risks.
• The audit report should include ‘a letter from the
Chairman of the audit committee discussing the
committee's responsibilities and activities during
the year.

32. Suggestions towards Auditors
• Evaluate the potential for fraud in a given audit
engagement.
• Be obliged to utilise tests that provide reasonable
assurance of detection of fraud
• Evaluate the strength of the overall control
environment
• Facilitate the identification of areas of high audit risk by
reviewing the procedure analytically
• Communicate their role and responsibilities to all those
who rely on their work (ie nature and limitation of
audit)
• Report directly to the public any material irregularities
and illegal acts discovered during an audit.