Court con­victs ex-Satyam chief of fraud in ‘In­dia’s En­ron’ case


An In­dian court on Thurs­day con­victed the for­mer chief of out­sourc­ing gi­ant Satyam and his aides over a US$2.25 bil­lion ac­count­ing fraud scan­dal dubbed “In­dia’s En­ron,” the pros­e­cu­tor said.

Byrraju Ra­ma­linga Raju, his brother and eight oth­ers were found guilty of ma­nip­u­lat­ing Satyam’s books in 2009 dur­ing the IT boom in In­dia in a case that shook the in­dus­try and raised ques­tions about the coun­try’s reg­u­la­tors.

“All the ac­cused have been con­victed of al­most all charges,” pros­e­cu­tor K. Surender told re­porters out­side the court in Hy­der­abad, cap­i­tal of south­ern Andhra Pradesh state.

Raju was charged with crim­i­nal con­spir­acy, cheat­ing and breaching public trust in a fraud that pros­e­cu­tors told the court caused 140 bil­lion ru­pees (US$2.25 bil­lion) in losses to share­hold­ers.

He faces pri­son for breach of trust fol­low­ing the years-long case and a trial in which pros­e­cu­tors pro­duced thou­sands of pages of fi­nan­cial doc­u­ments and 200 wit­nesses.

The Satyam scan­dal erupted in 2009 af­ter Raju ad­mit­ted in a let­ter to share­hold­ers to over­stat­ing prof­its for years and in­flat­ing the com­pany’s bal­ance sheet, a con­fes­sion that saw the com­pany’s share price plum­met.

Tech Mahin­dra, a unit of In­dian ve­hi­cle and farm equip­ment man­u­fac­turer Mahin­dra and Mahin­dra, bought Hy­der­abad-based Satyam in April 2009, sav­ing it from col­lapse.

Raju, who was ed­u­cated in In­dia and the United States, was one of the stars of In­dia’s soft­ware boom -- a key driver of the coun­try’s eco­nomic growth over the pre­vi­ous decade.

“The con­cern was that poor per­for­mance would re­sult in a takeover,” he said in his let­ter to share­hold­ers.

“It was like rid­ing a tiger, not know­ing how to get off with­out be­ing eaten.”

‘Like the mes­siah of IT’

The con­fes­sion sent shock­waves through the in­dus­try, which had put Raju’s suc­cess down to ded­i­ca­tion and hard work in Hy­der­abad, an IT hub that acts as the In­dian head­quar­ters of Google and Mi­crosoft.

“Raju was like the mes­siah of IT for Andhra Pradesh back then,” said KV Ku­ru­manath, an edi­tor at the Hindu Busi­nessLine news­pa­per.

“He was looked upon as a god, and a big achiever,” said Ku­ru­manath, who has been closely fol­low­ing the case.

Raju has been out on bail since Novem­ber 2011 af­ter spend­ing nearly three years be­hind bars dur­ing the trial.

His brother, Satyam’s for­mer man­ag­ing direc­tor B Rama Raju, was also con­victed, along with other em­ploy­ees and two for­mer Price­wa­ter­house­Coop­ers work­ers.

A se­nior in­ves­ti­ga­tor hailed the ver­dict and hoped the sen­tenc­ing of the 10 later Thurs­day or Fri­day would act as “a big de­ter­rent” to other cor­po­ra­tions against mis­us­ing share­hold­ers’ money.

“In­dia very rarely pros­e­cutes cor­po­rate fraud. And this is the big­gest cor­po­rate fraud case in South Asian his­tory. So for us, get­ting a con­vic­tion is a big victory,” he told AFP on con­di­tion of anonymity.

Raju’s lawyers have told the court that he was not re­spon­si­ble for the losses and that doc­u­ments filed dur­ing the trial were fab­ri­cated.

In­dia’s eq­uity mar­ket reg­u­la­tor last year slapped mul­ti­mil­lion­dol­lar fines on Raju for ma­nip­u­lat­ing the firm’s shares dur­ing the scan­dal.

But the case raised con­cerns about why reg­u­la­tors, who were only prompted to act af­ter Raju con­fessed, failed to spot the scam ear­lier, along with cor­po­rate gov­er­nance is­sues and ac­count­ing stan­dards.

“The big­gest thing this re­veals is the fail­ure of In­dia’s reg­u­la­tory sys­tem,” said S. Nagesh Ku­mar, a news an­a­lyst and for­mer edi­tor based in Hy­der­abad.

U.S. en­ergy gi­ant En­ron col­lapsed in 2001 in the wake of mas­sive false ac­count­ing rev­e­la­tions.

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