Satyam Cofounder Admits Fraud, Resigns

Lora Bentley

Just in case anyone is living under the misconception that the U.S. has a monopoly on corporate fraud, The New York Times reported Wednesday that the chairman of India's fourth-largest outsourcing provider admitted to falsifying the company's books.


Ramalinga Raju resigned after announcing he had been inflating the earnings and assets of Satyam Computer Services for several years. According to the story, "50.4 billion rupees, or $1.04 billion, of the 53.6 billion rupees in cash and bank loans the company listed as assets for its second quarter, which ended in September, are non-existent."


Raju said what started as a "marginal gap" between actual operating profits and what was on the company's books snowballed out of control as the company grew. "It was like riding a tiger, not knowing how to get off without being eaten," he said in a statement distributed by the Bombay Stock Exchange. He also told investors that neither he nor his co-founders had pocketed any of the money. He expressed "deep regret" and apologized to investors and employees.


Observers have already compared the situation to the Enron fiasco, and analysts say Satyam is likely to lose many of its customers to Wipro, TCS or other competitors.

Add Comment      Leave a comment on this blog post
Jan 11, 2009 10:53 AM Common Sense Common Sense  says:
There are no 'operational' gains when you try to undercut American workers by replacing them with cheap labor with fraudulent resumes and other fraudulent credentials like fake degrees. I suspect Americans were being paid fair wages prior to the H1B explosions fueled by Google's and Microsoft's greed. I only hope that Obama and Congress make the connection that Indian fraud has caused jobs for Americans to dry up in IT, accounting, healthcare, customer service, franchising and customer service. That, and that alone, is why Americans cannot pay mortgages any longer. Reply
Jan 15, 2009 8:34 AM Travis Travis  says:
It's all a matter of time before frauds like this happen all over the world. India is becoming a less popular destination for outsourcing, however other countries are taking it's place. Companies (American or not) will continue to outsource. I suspect this will be the spark for India's version of SOX and it's only a matter of time before every country on the planet has a similar regulation. Governance, risk, and compliance are not unique problems to be solved by American companies, every is on this boat together. Reply

Post a comment





(Maximum characters: 1200). You have 1200 characters left.




Subscribe to our Newsletters

Sign up now and get the best business technology insights direct to your inbox.