The Serious Fraud Investigation Office (SFIO), which undertook a mega investigation into the multi-crore Satyam fraud, has concluded that a company known for its exemplary performance and innovative management was bankrupted due to the ?dirty face of its promoters who cooked up the books of accounts for the past several years.??
The SFIO, which prepared an investigation report which runs into thousands of pages (including annexures), has revealed that the audacious falsification of accounts began eight years ago, that is in 2001.
After a scrutiny of Indian and foreign bank accounts and statements and questioning scores of people on oath, the SFIO has discovered that Satyam Computer Services Limited was in the red and recorded losses from 2007-08 onwards.
Despite committing financial falsifications, the company?s promoters blatantly showed receipt of interest on non-existent fixed deposits and as the report notes, ?also paid corporate taxes on such non-existent accrued interest just to avoid detection of the fraud perpetuated by them for the past several years?details of non-existent interest calculated on the basis of the details obtained by the company in juxtaposition with the confirmations directly received by the banks.??
An amount of Rs 186.90 crore was discovered to have been paid as excess corporate taxes, and thereby another fraud was committed on the company and its stakeholders.
Giving the genesis of the scam, the SFIO?s findings are that ?conspiracy?? to artificially and substantially jack-up the revenues and profits in account books began with the promoters deliberately leaving loopholes in the accounting software packages of the company.
The report?portions of which are with The Indian Express?describes how the promoters used ?admin? login IDs and generated fictitious invoices in the Invoice Management System, which could be concealed from the view of their employees, using ?admin? and ?super? login IDs.
These IDs, meant for single users, could be used by a group of hand-picked employees, at a time, and (since) there was poor password security and since the passwords were seldom changed.
With this modus operandi, the actual financial scam began to unravel as the SFIO notes ?in order to camouflage fictitious collections, the collections were first accounted as receipts in bank books in the current account maintained with Bank of Baroda, New York branch and subsequently they were shown to have been transferred to other bank accounts as fixed deposits.??
The report also analyses reasons for the fraud being made public by Ramalinga Raju via his e-mail dated January 7, 2009.
The ?trigger?? according to the SFIO was an email dated December 18, 2008 sent by senior executive, Jose Abraham (since resigned) to independent director KG Palepu, who in turn forwarded the same to M Rammohan Rao, chairman of the audit committee of Satyam. Ramamohan Rao, in turn, forwarded the email to other members of the audit committee and also to S Gopalakrishna, statutory auditor and also to Ramalinga Raju.
The SFIO?s conclusion on Raju?s confessional act is that ?Knowing that the fraudulent activities had come to the notice of many people and also apprehending action by regulatory agencies like SEC in the US and Sebi in India, Ramalinga Raju himself came out with his revelations???
The probe team concluded that after years of falsification of accounts and through reckless spending to project it as a cash rich company, the promoters brought the company to a stage of bankruptcy.
In an attempt to ?bail out?? the company, and party replace fictitious assets with real ones, Raju made an ?abortive?? attempt to acquire Maytas Infra Ltd (MIL) and Maytas Properties ltd (MPL).
Interestingly, the SFIO has noted how ?on being asked if these transactions had fructified, the shareholders of MIL and MPL would have lost their hard earned money, he (Raju) stated that the acquisition was a desperate act too satisfy the investors of SCSL who were insisting for better use of liquid assets shown in the balance sheet of the company?.thus Ramalinga Raju and Rama Raju knowingly tried to cheat the shareholders of MIL and MPL by passing on the fictitious assets of SCSL to MIL and MPL.??
