Satyam Computer Services and its former auditor PricewaterhouseCoopers have agreed to pay a combined sum of $17.5 million to settle US probes into the accounting fraud that created a furore in the Indian IT industry two years ago. Mahindra Satyam will pay $10 million to settle the US Securities and Exchange Commission (SEC) charges alleging that Ramalinga Raju-led Satyam Computers had fraudulently inflated revenues, income and cash balances by more than $1 billion over five years. Besides, India-based affiliates of PwC have also agreed to pay $7.5 million in settlement of related charges by the SEC and the Public Company Accounting Oversight Board.

Vineet Nayyar, chairman, Mahindra Satyam, said, ?We concluded that it is in the best interests of Mahindra Satyam and its shareholders to resolve this matter and put it behind us. The new management of the company is committed to the highest standards and we will never betray the trust of our investors.?

In its complaint, filed in US District Court in Washington, DC, SEC had alleged that former senior officials used false invoices and forged bank statements to inflate the company?s cash balances in an attempt to make it appear far more profitable to investors. Although Satyam?s shares primarily traded on the Indian markets, its American depository shares traded on the New York Stock Exchange.

Satyam agreed to hire an independent consultant to evaluate the internal controls the company is putting in place.

?The actions of Indian and US authorities have transformed Satyam into a new company with a new management, directors and investors and state-of-the art controls, resulted in criminal charges against seven former executives and given harmed shareholders the chance to recoup losses,? Robert Khuzami, Director of the SEC?s Division of Enforcement said.

?This comprehensive and thoughtful response underscores the ability of regulators across the globe to respond to cross-border misconduct in a coordinated manner,? he added. Cheryl Scarboro, chief of the SEC?s Foreign Corrupt Practices Act unit, added, ?The fact that Satyam?s former top officers were able to maintain a fraud of this scale represents a company-wide failure of extreme proportions that cut across a wide array of functions from customer invoicing to cash management.?

According to the SEC?s complaint, Satyam?s former senior managers engineered a scheme that created more than 6,000 phoney invoices to be used in Satyam?s general ledger and financial statements. Satyam employees created bogus bank statements to reflect payment of the sham invoices. This resulted in more than $1 billion in fictitious cash and cash-related balances, representing half the company?s total assets.

The SEC found that the audit failures by PW India affiliates ? Lovelock & Lewes, Price Waterhouse Bangalore, Price Waterhouse, Bangalore and Price Waterhouse, Calcutta ?were not limited to Satyam, but rather indicative of a much larger quality control failure throughout PW India.

Satyam closer to NYSE relisting

Following its settlement with the Securities and Exchange Commission (SEC) to the tune of $10 million, Mahindra Satyam is now inching towards re-listing on the New York Stock Exchange (NYSE). It is working out a clean chit formula before considering re-listing on NYSE, which is expected to happen by this fiscal end. The obvious trigger for re-listing include the settlements with SEC and class action suit.

The company reached a settlement with US SEC without admitting or denying allegations of any wrongdoing, which concludes the SEC?s investigation of accounting issues as to the company. Sources in the know said that the company’s work on the US GAAP accounts are currently in progress and is expected to completed before the year end.