What do the culprit of Satyam fraud deserve

By Aditya Mhatre at 8 January, 2009, 5:47 am

The Satyam fraud revelation in an already bearish market has almost killed most of my belief in stock market. As tips to be a good investor, I was taught to study the books of the companies, check if the company has the A-listers of the corporate world as board members, a good external auditor, and verify industry perception of the company. All that has gone for a toss. Here are a few questions that are mind boggling to me.

Mr. Raju says nobody had any idea about this fraud except him which simply isn’t acceptable to me. If you ask me, Raju is trying to be heroic and saving ignominy for senior management at Satyam. The board, CFO, MD are all responsible for this and they cannot plead ignorance including the board members who resigned in the last couple of weeks are responsible. My ruling for these people, charge them for being accomplice in the fraud or for negligence under companies act or even try to criminally charge them. All these people should be asked to surrender their remunerations for the past “several” years. Asking them to surrender 3 to 5 years of salary would be a good start. I would ask questions of business unit heads as well. They had to know that their units weren’t earning as much money as was being projected in the books of account. Their corporate ethics should be questioned as well.

Moving on to window dressing of books and auditors. I am not an expert in the field of financial auditing (apparently being one doesn’t help either), but aren’t the auditors supposed to do things like make phone calls to the bank to check if the cash mentioned in the books is actually in the bank or not? How can something shown on the books be non-exsitent and go undetected. My ruling to deal with this point, ban PwC and make the names of the entire account team for Satyam public to ensure that their careers/life is ruined. They should be publicly humiliated. Their faces should be pasted on flex banners by political parties and put up on the regular spots that carry “Happy New Year” banners. Why such harsh actions? This is an Andersen encore. Andersen simply got sold to Accenture and now most of the Andersen auditor are Accenture consultants. Clearly, the audit firms didn’t get the message the first time so now they cant complain.

Lastly, industry perception. The corporates came up with an innovative way of creating Industry perception by giving away awards to each other on a rotational basis. E&Y awarded Raju The Enterpreneur of the Year in 2007 and Satyam was awarded the Golden Peacock Award for Excellence in Corporate Governance in 2008. Don’t they look like fools. Such awards are brandished on the company website, Business News channels and when such a revelation is made, everyone is a made to look like a fool. These awards also mislead the investors who finally end up getting a hit the most i.e. the financial burden is carried by the investors.

Try imagine being a software developer/project manager/Business development officers who had calls or meeting scheduled on the day. Think about the questions that they must have had to answer. Also, don’t try to over analyze my above comments and treat them only as the thoughts of a naive investor.

Have been often my blog, Why don't you subscribe to our RSS feed.

If you enjoyed this post, make sure you subscribe to my RSS feed! Hope to see you again

Categories : Business