satyam fiasco
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Transcript of satyam fiasco
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BUSINESS ETHICS
PRESENTED BY:AANCHAL NARANG (241)
MONICA MAHALWAL (265)
SHUBHANKAR SORKAR (288)
PARUL GUPTA (297)
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SATYAM FIASCOTHE STORY OF BIGGEST CORPORATE
FRAUD OF INDIA
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CONTENTS
The rise of Satyam Revelation by Raju How did the fraud start? Probable reasons Maytas acquisition Why did Raju confess? Impact on the Nation investigation
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SATYAM COMPUTER SERVICES
Fourth largest IT outsourcing company of India. Employees more then 50,000 people in India. High global reputation. Offers services to more then 500 MNC’S.
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B RAMALINGA RAJU
Founder and former chairman of one of the biggest IT giant of our nation
“SATYAM COMPUTERS”…………………………. Guess what !! the prime
convict in the biggest scam of the country.
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THE RISE OF SATYAM
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The Rise of Satyam 1987 :
1991 :
1994 :
2000 :
2002 :
Satyam Computers Pvt. Ltd. Born.
June - First Fortune 500 Client.
August - Converted into Public Ltd. Co.
The Big Break- Allies with Dun and Bradstreet Corp.
• Declared one of the 100 most pioneering technology companies by World Economic Forum.
• Dataquest IT Man of the year award.
CNBC’s Asian Business Leader – Corporate Citizen of the year Award.
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ACHIEVEMENTS
Fastest growing company of India listed in three international exchanges i.e., NYSE, DOW & EURONEXT.
Winner of Innovation award for partner excellence in both 2007 and 2008 for giving significant business value.
UK trade & investment India (UKTI) Business award for corporate social responsibility.
Golden peacock award for excellence in Corporate governance.
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THE DISASTROUS REVELATION
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THE DISASTROUS REVELATION
• The Black day: 7th January, 2009
• Accounting fraud of over 7800 crores rupeesFrom past 7 years accounting books were cooked:1. Profits were inflated. 2. Understated liability and overstated debts.3. Accrued interests. 4. The gaps in the balance sheets are due to the
Inflated profits.
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CONFESSION LETTERRaju wrote in the confession letter :
“Every attempt to fill the gap failed & quote” .
It was like riding a tiger, not knowing how to get off without being eaten”.
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CONFESSION LETTER
Maytas Acquisition Last attempt to fill the gap.
Top officials were unaware Only MD and CFO were others.
No personal profits Did not sell any shares from 8years.
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MINUTES AFTER REVELATION
MMMMM
MINUTES AFTER REVELATION
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IMPACT OF SCAM
Stock Market Share-holders Indian economy
Employees Stake-holders
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SATYAM SHARES Biggest single day fall for a stock in
stock market. Rs. 175 ( Jan 6th)
77%
STOCK MARKET BSE sensex fell by 749.05 i.e., 7.25%. NSE fell by 192.40 points i.e., 6.18%.
COMPANIES WORTH 11464 crore 1607 crore.
All time low of Rs.11.50 on 9th Jan and closed at Rs.23.75/-
Compared to highest of Rs. 524.90/- on May 29,2008.
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HOW DID IT START ??
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ILLUSIONIST
B.RAMARAJU
V. SRINIVA
S
RAMALINGA RAJU
T.SRINIVAS
S. GOPALAKRISHN
A
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THE ILLUSIONIST
Ramalinga Raju :
B Rama Raju :
V Srinivas : S
Gopalakrishnan :
Talluri Srinivas :
Satyam former chairman
Brother of Ramalinga Raju
Former Managing Director
Ex-Chief financial officer
Price Waterhouse Auditor
Price Waterhouse Auditor
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CFO revealed during investigation
Started 6-7 years ago. 10 crore was inflated to 200 crore in balance
sheet. This marginal gap went on expanding over
years. 7800 Crore fraud
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IMPORTANT DATES AND EVENTS Dec 16,
2008
Dec 17, 2008
Dec 18, 2008
- decision to buy stake in MAYTAS infrastructure .
- Satyam call of the MAYTAS deal as a result of investor revolt.
- Satyam announces a board meeting on 29th in wake of investor revolt.
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IMPORTANT DATES AND EVENTS (Contd..)
Dec 19, 2008
Dec 23, 2008
Dec 28, 2008
Post MAYTAS U-turn, Unpaid files motion against Satyam and promoters for $1.1 Billion claiming fraud.
World bank confirms an 8 year ban of Satyam for data theft and bribery .
4 Board members resign in wake of MAYTAS controversy and board meeting postponed to Jan 10th 2009.
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IMPORTANT DATES AND EVENTS (Contd..)
Jan 3, 2009
Jan 7 & 8, 2009
Promoter stake in Satyam coming down to less than 5%.
Mr. B. R. Raju resigns and cites financial irregularities in the book of accounts to the tune of $1.5 Billion.
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sPRICE
WATERHOUSE COOPER
SATYAM AUDITORS
Among the “BIG 4”.Other 3 are:
DeloitteKPMG
Ernst &Young
Functions: Finance & Accounting,
internal audit, tax compliance, logistics & human resources.
Performs non-core functions of Organization
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The Auditors - PWC
PwC was paid 3.53 crore for the year 2008
Comparatively, same industry Infosys paid 1 crore
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PwC - Partners in Crime ???
Previous record - Satyam has also been accused of frauds in
2001 and 2003. No importance was given to this.
Getting third party evidence - No bank confirmation on fixed deposits Accrued interest(fixed deposit) Debtors confirmation
Factors overlooked - Changing of accounting years Huge debt despite cash surplus
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PwC - Partners in Crime ???
What could have been sensed ?
Excess cash: No distribution among share holders nor
invested to earn valuable interest Operating margin:
Peer companies - 20-25% Satyam - 3%
Recession: Huge profits compared to others always a
chance of creative accounting.
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PROBABLE REASONSPRESSURE TO
MEET EXPECTATION
Growing CompetitionThreat of being overtaken
OVERCONFIDENCE On his ability
PERSONAL BENEFITS
Siphoning of fundsSalary of non-existent 13000 employees
“Since about seven years we wanted to show more income in the accounts to avoid others from involving in the company affairs and any possible hostile acquisition.
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Company Logo
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WHY DID RAJU CONFESS
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WHY DID RAJU CONFESS
The gap in the balance sheet reached unmanageable proportions and could not be filled anyhow in future.
The whistle blower whose email to a Satyam board member triggered a chain of events .
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IMPACT OF SCAM ON THE NATION Jobs of over 50,000 technocrats were at risk.
Country’s booming economy feared slight collapse as country's GDP fell by estimated 0.4%.
India’s IT sector suffered downturn as its image was tarnished globally.
World Bank barred Wipro, Mega soft and 3 other IT companies after the Satyam debacle.
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RAJU & OTHERS UNDER PROBE
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CBI investigating further
CBI filed a charge sheet against nine on April 7,2009.
Apart from illusionist four others are :- Rajus second brother S. Raju- 2 employees from finance wing - Vice president (finance)
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Regulators Investigating Satyam
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SATYAM UNDER RECONSTRUCTION
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SATYAM UNDER RECONSTRUCTION
Appointing new board. Board appointed by government :
• former Nasscom chief – Kiran Karnik,• Chairman HDFC – Deepak Parikh• Former SEBI member – C. Achuthan .
Satyam shares gained over 44% day after appointment of the new board.
New CEO – A S Murthy Tech Mahindra acquired Satyam on
April 13,2009.
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THE FULL TRUTH,IT APPEARS,IS NOT YET OUT.
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BREACH OF BUSINESS ETHICS Lack of corporate governance Lacks financial disclosure & transparency Damaged relation with stake holders
including employees , investors etc. Inequitable treatment of shareholders Zero integrity Wrong code of conduct Falsification Alteration Creative accounting Cooking the books Window dressing
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THANK YOU
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