NEW DELHI — The head of Satyam Computer Services confessed to making up more than 10,000 employees to siphon money from the software company and to using his elderly mother’s name to buy land with the cash, a prosecutor said in a court appearance Thursday.
Skip to next paragraph
Enlarge This Image
Mahesh Kumar A./Associated Press
B. Ramalinga Raju, the founder and chairman of Satyam, has been held in custody since his arrest two weeks ago.
Add to Portfolio
* Satyam Computer Services Ltd
Go to your Portfolio »
B. Ramalinga Raju, the founder and chairman of Satyam, an Indian information services outsourcing company, also confessed to forging documents related to bank deposits, K. Ajay Kumar, a prosecutor with the Crime Investigation Department of the Indian police, told a court in the southern city of Hyderabad.
Mr. Raju’s lawyer, S. Bharat Kumar, told the court that the prosecutor’s claims were false and reiterated the denial afterward, news agencies reported. The accusation of “diversion of funds is nothing but imagination,” Bloomberg News reported the lawyer as saying. “All through the interrogation there were no questions about any diversion of funds, laundering of funds. And there were no admissions.”
The prosecutor argued that Mr. Raju, his brother and the chief financial officer of Satyam should remain in police custody, which a judge extended until Friday.
Ajay Kumar, the prosecutor, told the court that Satyam had 40,000 employees, far fewer than the nearly 53,000 it claimed. The money recorded as having been paid to those employees was actually used by Mr. Raju to buy land in other people’s names. Mr. Raju had conducted nearly 400 such “benami” land deals — or deals under a fake name — including some under his mother’s name, Mr. Kumar said.
Satyam, which is based in Hyderabad, has global clients and listings on the New York Stock Exchange and Euronext. It became the focus of the highest-profile fraud case in India after Mr. Raju said on Jan. 7 that he had fabricated about $1 billion in cash at the company and padded profit margins — though conversations with investigators and the prosecutors’ account appeared to indicate that the extent of the fraud was much more severe than that.
Making up employees might sound complicated, but investigators said it was not that difficult. “Employees are just code numbers in your system,” explained one person involved in the investigation, who was granted anonymity to provide details about it. “You can create any amount of them. All you need to do is make sure the income tax is deducted properly” and insurance is paid.
Satyam’s new state-appointed board has hired KPMG and Deloitte Touche Tohmatsu to restate the accounts, Bloomberg reported. The growing size and scope of the fraud is forcing many of its corporate clients to rethink their software and back-office operations, analysts say. The revelation that employee numbers may have been fudged could intensify such re-evaluations, as clients question whether their invoices have been padded.
Satyam claims a third of the Fortune 500 companies as clients; General Motors, General Electric and Nestlé do business with Satyam. So far, just one client, State Farm Insurance, has publicly broken ties with Satyam.
The company’s global links, and its international stock listings, mean that prosecutors and investigators from India are joining forces with those from the United States to determine how far the fraud went and how it was committed. Investigators in India say that the Securities and Exchange Commission in Washington is working with the Indian market regulator, the Securities and Exchange Board of India.
Subscribe to:
Post Comments (Atom)
Posts
No comments:
Post a Comment