Satyam Computers under India’s biggest company fraud scam. Chairman steps down admitting it.

As a further development in this story, the erstwhile chairman Ramalinga raju has surrendered to the Andhra Pradesh Police on Jan 9th.
Raju has been arrested under the Indian Penal Code sections 120B, 409, 420, 468 and 471. These sections correspond to forging, falsifications of the records , criminal breach of trust and cheating. Reports say that if proved guilty in these sections, he might be put behind the bars for upto 10 years.

Earlier on the day the Government of India superceded the Satyam board. An interim board will be nominated very soon.  The planned Jan 10 th board meeting was cancelled in this regard.

Satyam Computers, one of India’s largest IT companies, has come under the fraud scam of balance sheet manipulation. Ramalinga Raju, the chairman of the company has resigned admitting committing this fraud of such huge proportion.

Satyam is the India’s fourth largest IT firm and has has over 51,000 employees. Giving all the details of the financial irregularities, Raju said the company’s balance sheet as of September 30 carries “inflated (non-existent) cash and bank balances of Rs 5,040 crore (as against Rs 5,361 crore reflected in the books.”

“It was like riding a tiger, not knowing how to get off without being eaten,” Ramalinga Raju said in a letter to Satyam’s board of directors, wherein he listed major financial wrong-doings over the years to inflate the profits.

Noting that every attempt to eliminate gaps in balance sheet, purely on account of inflated profits over several years, failed, Raju said: “I am now prepared to subject myself to the laws of the land and face consequences thereof.”

“It has attained unmanageable proportions as the size of the company operations grew significantly… The differential in the real profits and the one reflected in the books was further accentuated by the fact that the company had to carry additional resources and assets to justify higher level of operations thereby significantly increasing the costs,” he said.

Raju also clarified that he or the company’s MD did not take “even one rupee/dollar from the company and have not benefited in financial terms on account of the inflated results.”

Satyam Computers is listed on the New York Stock Exchange along with the Bombay Stock Exchange and the National Stock Exchange (NSE) of India. Satyam’s stock fell over 80% in the NSE after the news flow appeared.  The stock fell over 50% for the second consecutive day on NSE during the trading on Jan 9th 2009.