B. Ramalinga Raju, founder and former chairman of Satyam Computers Services, was sentenced to seven years and imposed a fine of Rs. 5.5 crores, after being found guilty in a multi-crore corporate scandal. Along with him, Rama Raju, his brother and former Managing Director of Satyam and eight others were found guilty of criminal conspiracy and cheating. Ramalinga Raju had admitted to the fraud accounting to Rs. 7,000 crore.
What’s the scandal all about?All was well for the once-fourth-largest software company in India, started in 1987. Or so it seemed. On January 7, 2009, Ramalinga Raju resigned after publicly announcing his involvement in an accounting fraud, which caused loss to the investors to the tune of Rs.14, 162 crore.
Ramalinga Raju confessed in a letter that he falsified profits through fake sales invoices and forged bank statements.
To make things worse, Ramalinga Raju had attempted to conceal the fraud by buying the companies of family members, which included his sons’ Maytas. Ramalinga Raju and his brother Rama Raju were arrested two days later.
CBI took over the investigation. The scam not only affected the investors but also 50,000 employees.
Who’s Ramalinga Raju?A resident of Hyderabad, Ramalinga Raju earned an MBA from Ohio University, in the United States. He ventured into many businesses before founding Satyam Computers. He steered Satyam to become a pioneer of outsourcing.
Why should a company project an inflated revenue?Accounts are falsified and assets are overstated by a company to make business appear financially stronger than it really is.
This kind of forgery is done usually to lure investors who buy the shares of the company. It could also be done to get financial help from banks and or to cover up theft.
How did things change for the company?Government disbanded the company’s board and appointed new persons to it. Tech Mahindra, owned by Mahindra & Mahindra, acquired Satyam Computers in April 2009 and rebranded it as Mahindra Satyam.
What’s the update?Ramalinga Raju has been lodged in the Cherlapally Central Prison, Hyderabad. He, along with seven other, has filed an appeal in the Metropolitan Session Court, seeking bail and to set aside the trial court’s judgement.
The court has reserved the order till April 20.
