On 7 January 2009, the chairman of Satyam, Byrraju Ramalinga Raju, resigned, confessing that he had manipulated Rs 14,162 crore accounts in several forms. The global corporate community was said to be shocked and scandalised.
In February 2009, the CBI took over the case and filed three partial charge sheets (dated 7 April 2009, 24 November 2009, and 7 January 2010), over the course of the year. All charges arising from the discovery phase were later merged into a single charge sheet. On 10 April 2015, Byrraju Ramalinga Raju was convicted with ten other members.
Role of Auditors
PricewaterhouseCoopers (PWC) affiliates served as independent auditors of Satyam Computer Services when the scandal in the books of Satyam Computer Services broke. The Indian arm of PwC was fined $6 million by the SEC (US Securities and Exchange Commission) for not following the code of conduct and auditing standards in its duties related to the auditing of the accounts of Satyam Computer Services. In 2018, SEBI (Securities and Exchange Board of India) barred Price Waterhouse from auditing any listed company in India for two years, saying that the firm was complicit with the Satyam fraud’s main perpetrators and did not comply with auditing standards. SEBI also ordered disgorgement of over Rs 13 crore wrongful gains from the firm and two partners. PwC announced their intent to get a stay order.
On 10 January 2009, the Company Law Board decided to bar the current board of Satyam from functioning and appoint ten nominal directors. “The current board has failed to do what they are supposed to do.
On 10 January 2009, the same day, the Crime Investigation Department (CID) team picked up Vadlamani Srinivas, Satyam’s then-CFO, for questioning. He was arrested later and kept in judicial custody.
On 11 January 2009, the Government nominated noted banker Deepak Parekh, former NASSCOM chief Kiran Karnik, and former SEBI member C Achuthan to Satyam’s board.
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 family-owned corporate environment.
Immediately following the news, Merrill Lynch (now a part of Bank of America) and State Farm Insurance terminated its engagement with the company. Also, Credit Suisse suspended its coverage of Satyam, which was also reported that Satyam’s auditing firm PricewaterhouseCoopers will be scrutinised for complicity in this scandal. SEBI, the stock market regulator, also said that, if found guilty, its license to work in India may be revoked. 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 scandal’s aftermath.
On 7 January 2009, The New York Stock Exchange has halted trading in Satyam stock.
On 12 January, India’s National Stock Exchange announced that it would remove Satyam from its S&P CNX Nifty 50-share index. The founder of Satyam was arrested two days after he admitted to falsifying the firm’s accounts. Ramalinga Raju was charged with several offences, including criminal conspiracy, breach of trust, and forgery.
On 10 January 2009, Satyam’s shares fell to 11.50 rupees, their lowest since March 1998, compared to a high of 544 rupees in 2008. On the New York Stock Exchange, Satyam shares peaked in 2008 at US$29.10. By March 2009, they were trading around US$1.80.
The Indian Government has stated that it may provide temporary direct or indirect liquidity support to the company. However, whether employment will continue at pre-crisis levels, particularly for recruits, is questionable.
On 14 January 2009, Price Waterhouse, the Indian division of Pricewaterhouse announced that its reliance on potentially false information provided by the management of Satyam might have rendered its audit reports “inaccurate and unreliable”.
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 ₹200 million (US$3 million) every month for paying these 13,000 non-existent employees.
The Indian Government designated A. S. Murthy to become the new CEO of Satyam effective 5 February 2009. Special advisors were also appointed, Homi Khusrokhan of Tata Chemicals and Chartered Accountant T. N. Manoharan.
On 4 November 2011, the Supreme Court granted bail to Ramalinga Raju, as well as two others accused in the scandal, since the investigation agency CBI had failed to file a charge sheet, despite having already had 33 months (from the time of Raju’s arrest) to do so.
On 15 September 2014, the special CBI court hearing the case asked the concerned parties to appear before the court on 27 October 2014. Date of judgement was to have been indicated later on that day.
On 9 April 2015, Raju and nine others were found guilty of collaborating to inflate the company’s revenue, falsifying accounts and income tax returns, and fabricating invoices, among other findings, and sentenced to seven years imprisonment by Hyderabad court. Kunjumani and his brother were also fined by the court 55 million rupees (US$883,960) each.
Acquisition of Satyam by Mahindra Group
On 13 April 2009, via a formal public auction process, a 46% stake in Satyam was purchased by Mahindra & Mahindra owned company Tech Mahindra, as part of its diversification strategy. Effective July 2009, Satyam rebranded its services under the new Mahindra management as “Mahindra Satyam”. After a delay due to tax issues, Tech Mahindra announced its merger with Mahindra Satyam on 21 March 2012, after the two companies’ board approved. The companies are merged legally on 25 June 2013.