Raju & Company Case Study

5. The Modus Operandi of Accounting Fraud: As financial frauds go, the one wreaked by Raju & Company was quite uncomplicated. Satyam’s top management simply cooked the books of company by overstating its revenues, profit margins, and profits over aperiod of 5-years, from 2003 to 2008 and applied complex methods like derivatives accounting or off-balance sheet transactions that were used by Enron’s executive. Keen to project a consistently rosy picture of the company to investors, employees and analysts, the Rajus manipulated Satyam’s books so that it appeared to be a big-fat enterprise than it actually was. To achieve this, they sewed up deals with fictitious clients.For good measure, profits too were padded up to show healthy margins. Over

Riding a Tiger: Raju was compelled to admit to the fraud following an aborted attempt to have Satyam invest $1.6 billion in Maytas Properties and Maytas Infrastructure (“Maytas” is Satyam spelled backwards)—two firms promoted and controlled by his family members. On December 16, Satyam’s board cleared the investment, sparking a negative reaction by investors, who pummeled its stock on the New York Stock Exchange and Nasdaq. The board hurriedly reconvened the same day and called off the proposed investment. The matter did not die there, as Raju may have hoped. In the next 48 hours, resignations streamed in from Satyam’s non-executive director, Krishna Palepu, and three independent directors. The attempt finally failed, and Raju made the stunning confessions three weeks

Punishment by the Court: Accused in the case, including Raju, were charged with cheating, criminal conspiracy, forgery, breach of trust, inflating invoices, profits, faking accounts and violating number of income tax laws. The CBI has filed three charge-sheets in the case which were later clubbed into one massive charge-sheet running over 55,000 pages. Over 3000 documents and 250 witnesses were parsed over the past 6 years. As the judge reads his verdict on Monday, it remains to be seen whether the scam that shook India and the private sector for its sheer magnitude and brought to dust the edifice of India Inc. will finally get its much deserved closure or not. Satyam’s finances were a black-box with an access card so rare that only Raju and his confidants knew what exactly was going on in the company. Ganesh Natarajan of Zensar Technologies famously said, “If anybody in the industry is capable of pulling off a scam like this, it would be Ramalinga Raju…the capability, the thinking through, the planning of such a large operation….only he had the ability to pull it off." A special CBI court on April 9, 2015 finally, sentenced B. Ramalinga Raju, his two brothers and seven others to seven years in prison in the Satyam fraud case. The court also imposed a fine of Rs. 5 crore on Ramalinga Raju, the Satyam Computer Services Ltd’s founder and former chairman, and his brother B Rama Raju, and Rs. 20-25 lakh each on the remaining accused. The 10 people found guilty in the case