How The Fraud of Satyam Began

Satyam (Sanskrit for 'truth') Computer Services Ltd. was founded by B.Ramalinga Raju in 1987. The company offers information technology (IT) services spanning various sectors, and is listed on the New York Stock Exchange and Euronext.

Satyam's network covers 67 countries across six continents. The company employs 52,000 IT professionals across development centers in India, the United States, the United Kingdom, the United Arab Emirates, Canada, Hungary, Singapore, Malaysia, China, Japan, Egypt and Australia. It serves over 654 global companies, 185 of which are Fortune 500 corporations. Satyam has strategic technology and marketing alliances with over 50 companies. Apart from Hyderabad, it has development centers in India at Bangalore, Chennai, Pune, Mumbai, Nagpur, Delhi, Kolkata, Bhubaneswar, and Visakhapatnam.

According to Wikipedia , Mr.Raju stated that:

"What started as a marginal gap between actual operating profit and the one reflected in the books of accounts continued to grow over the years. It has attained unmanageable proportions as the size of company operations grew significantly (annualised revenue run rate of Rs 11,276 crore in the September quarter of 2008 and official reserves of Rs 8,392 crore). As the promoters held a small percentage of equity, the concern was that poor performance would result in a takeover, thereby exposing the gap. The aborted Maytas acquisition deal was the last attempt to fill the fictitious assets with real ones. It was like riding a tiger, not knowing how to get off without being eaten.”

In the fiscal year to March 2008, Satyam reported a 46.3 per cent rise in revenue to $2.1 billion under the US accounting standards, while net income rose 39.7 per cent to $417 million.

In October, it said revenue in this fiscal year ending in March 2009 will rise 19-21 percent to $2.55-$2.59 billion. Earlier the company said that it plans to expand its presence in Europe, Asia-Pacific and the Middle East to cut its dependence on the United States.

The news of Satyam acquiring Maytas Infrastructure for $1.6 billion (Rs 7658-crore) sent shockwaves across the country,Many questioned the things behind the deal. There was heavy pressure by share holders and lots of criticisn over governance issues,by this satyam has withdrawn the Offer with in hours of the making of the proposal.But by the time damage was done. The scrip lost over 30 per cent in India.

There was a quick change in plan after investors shown their opposition to the deals by pushing shares in India's No. 4 software services company down 55 per cent in New York Stock Exchange trade. Satyam founder and Chairman B Ramalinga Raju and other insiders hold 36 per cent in Maytas Infra and 35 per cent in Maytas Properties.

Analysts questioned the motives of Satyam's top executives, saying there was a potential conflict of interest because they hold stakes in both companies.

Also questions raised in the minds of analysists like when the market is down and companies are saving their cash to help weather the global economic slowdown , satyam goin for huge aquisision.Ramalinga Raju originally said the deal by saying it would "de-risk" Satyam's core business in IT services.Then immediately came a severe blow to the Hyderabad-based IT provider facing flak from investors on its decision to acquire Maytas' was World Bank banning it for 8 years.

The World Bank has banned Satyam from providing it services for eight years for alleged malpractices, including bribery.The ban will severely impact the business prospects of the Hyderabad-based company, already battling to retain and attract fresh business in a recession-hit global market.

The World Bank debarment has been meted out for "improper benefits to bank staff" and "lack of documentation on invoices.” World Bank information security chief Robert Van Pulley admitted to the ban during a recent meeting with the officials of Government Accountability Project (GAP), a whistleblower protection organisation in the US. The bank has handed over the case to the US Justice Department and the Treasury Department.

Satyam started providing IT services to the World Bank in 2003. Two years later, allegations of bribery surfaced. In 2007, an internal World Bank investigation found that former VP Mohamed Muhsin had secured contracts and purchase orders worth $100 million for the Indian firm in return for Satyam's stock options (ADRs) at preferential prices. After which Muhsin was banned permanently from the bank. However, Satyam was allowed to work for the bank till 2008.

There have also been allegations against Satyam of causing security breaches at the bank. World Bank's records, which contain sensitive financial information, have reportedly been illegally accessed over the last year.

Now the question is , is it really a fraud or a mistake which brought them here or Wrong step taken by satyam like aquiring maytas as if it has been succeeded nobody might have known this.

Raju said

"It was like riding a tiger, not knowing when to get off without being eaten," Mr Raju said, describing how the fraud, which he claimed had begun as an effort to smooth over a minor accounting discrepancy, had "attained unmanageable proportions as the size of the company operations grew".

According to Raju this was done few years back in order to smoothen small accounting difference which means like it was done intentionally to a small extent but as the company was growing it was also growing at a rapid pace.

Now from past few years satyam haven't faced huge loss , share holders were in profit and investers were also in profit as the company was globalizing at a rapid pace.It made Indian software giant on the global market. Other companies have gained up their business looking at the pace of satyam which resulted in the development of IT.

Satyam was trying to cut down the dependencies on the US market which is good for India.There was lot of employeement given by satyam. I agree this is a FRUAD which effects investers.But please comment on this, like they have done unethical business , but what do we say for their achievements of satyam for we people.what should have been done by satyam, do they have said this issue 7 years back when they are gaining the name in the market or what else could have been done in order to save our Indian IT Giant
SATYAM.

WHAT WOULD BE THE FUTURE OF SATYAM?????