Satyam Computer Services, Inc.

: 
Satyam Computer Services, Inc. Fraud of Epic Proportions 

The Beginning: 
The Beginning B. Ramalinga Raju (“Raju”) and his brother-in-law D. V. S. Raju established Satyam Computer
services, Inc. on June 24, 1987 when Raju was 33 years old. Raju was born on September 16, 1954 and was the son
of a farmer. He was educated in the U.S.A. at Ohio University and took executive classes at Harvard University.
Satyam means truth. The company had twenty employees after its first year in business. 1989 – Listed on NASDAQ. 

The Distinction: 
The Distinction The company was incorporated in 1991 as a public liability company. Listed on NASDAQ, NYSE US
& Euronext, Amsterdam, Europe and NSE, as well as the Bombay Stock Exchange. The company separated itself as
a customer-orientated global organization. One of its first customers was Deer and Co. Also held contracts with
Microsoft, Emirates, TRW, i2 Technologies and Ford. Satyam reached companies in 55 countries. Rated India’s 4 th
largest computer software exporter. Satyam formed several subsidiaries: Satyam Renaissance, Satyam Info way,
Satyam Spark Solutions and Satyam Enterprise Solutions. One of the first Indian companies to enter the internet
service market. Satyam received numerous awards and accolades throughout the IT and financial community. Raju
rubbed shoulders with the political elite including U.S.A. President Bill Clinton. 

The Failed Acquisition: 

The Failed Acquisition There was a failed acquisition attempt involving Raju’s two son’s who owned the Maytas
Properties and Maytas Infrastructure (Satyam spelled backwards). The Board of Director’s of Satyam initially
approved the acquisition of the Maytas companies but shareholders balked and the Board reversed their decision.
Huge red flags were raised regarding the relationship as well as how the Board initially approved the acquisition
without a shareholder vote. The BOD member, Krishna G. Palepu stated that Satyam should reevaluate the
company’s assets. Several Board members resigned after the reversal the decision to acquire the Maytas
companies. 

The Tiger’s Bite: 

The Tiger’s Bite Stock share soared until the last quarter of 2008. Jose Abraham (“Anonymous Whistleblower”) sent
an email to an outside independent Board of Director, Krishna G. Palepu explaining that Satyam had NO liquid assets
and verification could be obtained from the banks. BOD member, Krishna G. Palepu forwarded the email first to M.
Rammohan Rao another outside independent BOD. Outside independent BOD, M. Rammohan Rao then forwarded
the email to Satyam’s internal company BOD members V. S. Raju and T. R. Prasad. The email was also sent the
company’s outside statutory auditor S. Gopalakrishnan of Price Waterhouse Cooper (“PWC”). The email was the
forwarded to Raju - - who had been avoiding calls from BOD members and audit committee members. Raju sent the
email and discussed the allegations in an email with Satyam’s CFO and VP of Finance G. Ramakrishna between
August 25, 2008 and January 7, 2009. 

The Letter: 
The Letter Raju the Founder and Chairman publically confessed to financial statement fraud in a letter on January 7,
2009. His letter stated that the fraud consisted of approximately Rd 78 billion…although the charge sheet filed by the
CBI stated the fraud was more like Rs 140 billion. Raju admitted to taking large amounts of Satyam’s assets to fund
his own personal wealth. The letter specifically stated that he personally debunked shareholders by falsifying
accounts, creating fictitious assets, padding the company’s profits and faking bank balances. Raju is notoriously
remembered for this statement, “It was like riding a tiger, not knowing how to get off without being eaten.” On January
9, 2009, the Government of India arrested Raju and D.V. S. Raju, dissolved the Board of Directors and began to
investigate the true scope of Satyam’s crime the Serious Fraud Investigation Office. The Serious Fraud Investigation
Office could not follow up contact with the Whistleblower – but was able to investigate and initiate criminal charges. 

The Details: 
The Details Raju created false invoices to show inflated sales which artificially inflated the accounts receivable
account thereby inflating the company’s revenues. Raju forged Board of Director resolutions. Raju obtained
unauthorized loans and cash advances. Raju shipped money to offshore accounts and tax havens and re-routed it
back to India for his own use…money laundering. Raju and others on the inside offloaded worthless stock and
participated in insider trading. 

The Motivation for Fraud: 

The Motivation for Fraud Ego Recognition Occupational Fraud Power Greed 
The Effects of Fraud: 
The Effects of Fraud The effects of fraud could be devastating to a company which could lead to serious of
consequences whether to the economy, the country, or the shareholders. Some consequences of fraud which
happen based on the Satyam Computer Services LTD Scandal are: The price per share fell sharply by 77.6% in the
Bombay Stock Exchange in India. In the United States the price per share fell by over 90% to $.85. Millions of
shareholders in India and abroad who had shares of the company lost their money. 53,000 of employees could be in
jeopardy of losing their job position in order to compensate for the loss which was created by the fraud. The economy
suffered huge losses because of the fraud scandal. In addition the government can also suffer in losses in tax
revenue. The effect of fraud can also tarnish India’s image as one of the important outsourcing hubs in the world. If
India’s image is tarnish other companies within the country can suffer as well they will lose credibility in their
accounting and lose their trust. 

The Effects of Fraud: 

The Effects of Fraud The effects of fraud could have short or long term effect for the company, the country or even
the shareholders. the effect of fraud can also have serious consequences to the individuals running the fraud
scheme. For instance: Mr. Raju, Chairman of Satyam Computer Services, Inc. and the other individuals involved in
the fraud scandal were arrested and charged for conspiracy, criminal breach of trust, cheating, forgery and showing
forged documents as genuine. In addition, Mr. S Gopalakrishman , the partner of PwC and Mr. S Talluri the audit
engagement leader were also arrested and charged for cheating, forgery, criminal breach of trust and criminal
conspiracy. In India any auditor which engages in writing misleading audit report is considered a criminal offense.
PwC was fined $6 Million in penalties. Also, PwC in India had to stop taking USA clients for a whole six months.
Since the financial records have been altered Deloitte & KPMG had to come in and restate the financial statements of
Satyam in order to show the true operating vale of the company. 

Effects of fraud: 
Effects of fraud Satyam was order to pay $125 million and pwc was required to pay $25.5 million to settle shareholder
suits against the companies. Negligence on pwc’s behalf entailed non interest bearing deposits of over a billion
dollars on the company’s balance sheet not tested Audit fees from pwc charged to satyam increased 300% Pwc was
subjected to oversight by independent monitor for 4 years 

Effects of fraud: 
Effects of fraud Indian government seized control of satyam and removed the company’s board and directors and top
managers. Tech Mahindra bid $1.2 billion to acquire satyam in april of 2009. Tech Mahindra merged with satyam in
june 2013 after 4 years integration efforts. 

Summary: 
Summary B. Ramalinga Raju (“Raju”) and his brother-in-law established Satyam in 1987 as an Information
Technology service company Allegations of fraud were sent to company insiders in 2008 alleging satyam had no
liquid assets Raju confesses to falsifying bank accounts and overstating revenue PWC is alleged of negligence
forced to pay $31.5 million to US regulators and shareholders Satyam was taken over by the Indian government and
Tech Mahindra bid $1.2 billion to acquire the corporation