Satyam Computer Services’ B Ramalinga Raju sentenced to 7 years in jail, fined Rs. 5.5 crores

The rise and fall of one of India’s pioneering tech companies.

By Dileep Thekkethil

The verdict of the biggest corporate account fraud India has ever witnessed is finally out. The CBI special court which heard the case against the former chairman of Satyam Computer Services, B Ramalinga Raju, found him guilty of committing account fraud worth Rs. 7000 crore ($1.1 billion), sentencing him to seven years in jail and imposing a fine of Rs.5.5 crore ($1 million).

According to V Chandrashekhar, Superintendent of Police, CBI Hyderabad Zone, leaving Raju’s brother B Suryanarayana Raju and former chief auditor of Satyam, V S Prabhakar Gupta, all 9 individuals, who were accused of the fraud were found guilty under sections 467, 468, 471 and 477A of IPC, relating to forgery of valuable security, forgery for purpose of cheating and falsification of accounts, respectively and has been sentenced to seven years rigorous imprisonment in addition to varying fines.

The incident leading to the case first emerged on the morning of January 2009 when Ramalinga Raju dropped a letter ‘bomb’ to Satyam employees, investors and government officials, confessing that he along with some of his close aides in Satyam tampered with the account of one of India’s pioneering technology firms.

The case against Satyam, popularly known as ‘Enron of India’, took its toll on the investors as reports indicate that investors lost close to Rs. 14,000 crore ($2.2 billion) after the letter from Raju surfaced, causing a stock market free fall.

Raju tried reasoning his act by writing in the letter: “As the promoters held a small percentage of equity, the concern was that poor performance would result in a takeover, thereby exposing the gap. What started as a marginal gap between actual operating profit and the one reflected in the books of accounts continued to grow over the years. It has attained unmanageable proportions as the size of the company operations grew significantly.”

Before the whole episode of account scam unfolded, Raju was one of the top ranked Indian technocrats and was also in the top tire which was then occupied by global CEO’s and founders like Steve Jobs and Bill Gates

Raju wrote in his letter that after the second quarter results came out, he felt like “a rider on top of a hungry tiger”, clueless of how to get off without becoming a prey. The actual numbers and the artificial ones prepared by Raju were too wide to bridge, forcing him to abandon the ship by surrendering to the laws of the land.

When the company announced the second quarter results for the year 2008, Raju was well aware that the deck was flooding and the cracks were getting bigger beyond repair, but he went on to claim that the company earned revenue of Rs. 2,700 crore against the actual Rs. 2,112 crore at a margin of Rs. 649 crore against the actual Rs 61 crore, which was less than 3% of the company’s real revenue.

Raju’s attempts to revive the company further increased the deficit as he had to pay salaries and at last he was forced to resign. In the final page of the letter he wrote, “under the circumstances, I am tendering my resignation as the chairman of Satyam and shall continue in this position only till such time the current board is expanded.”

Raju, along with his brother Ram Raju, was arrested by the Crime Investigation Department of Andhra Pradesh police, two days after his confession. The prosecution section of the Satyam fraud case presented with 3,000 documents and 226 witnesses during the trial which lasted for nearly six years.

Owing to the resignation of Raju and others, the government made its intervention and Satyam was formally put up for public auction. Mahindra & Mahindra owned Tech Mahindra bought the company by offering the shareholders Rs. 58/share.

Here’s a timeline of major events regarding the Satyam case:

1987: Ramalinga Raju, at the age of 33, begins  Satyam Computer Services Ltd along with his brother and brother-in-laws in the city of Hyderabad.

1991: Satyam enlisted on the Bombay Stock Exchange

1993: Satyam Computers signs up with US-based Dun & Bradstreet to set up Dun & Bradstreet Satyam Software.

1999: Satyam Infoway (Sify), a subsidiary firm of the company becomes the first Indian ICT company to be listed on Nasdaq.

1999: Satyam expands its operations to 30 more countries.

January 7, 2009: Ramalinga Raju drops the letter bomb confessing that he inflated the company’s earnings and subsequently resigns

January 8, 2009: Freezing of all 30 bank accounts of Satyam by Citi Bank.

January 9, 2009: Ramalinga Raju and his brother B. Rama Raju arrested.

Jan 9, 2009: Satyam out from the list of companies enlisted in Sensex, Nifty.

Jan 10, 2009: Andhra Police arrests Former CFO of Satyam, Srinivas Vadlamani.

Jan 11, 2009:  Deepak Parekh, Kiran Karnik and C. Achuthan takes charge of Satyam board after government intervention.

February 2009: Case handed over to the CBI resulting in the filing of three charge sheets.

Mar 6, 2009: SEBI gives permission to selected investors for the bidding process

April 22, 2009: Satyam purchased by Mahindra & Mahindra owned company Tech Mahindra via a formal public auction process

June 22, 2009: Satyam becomes Mahindra Satyam.

2010: Raju denies charges filed by CBI against him.

November 2, 2011:  Raju out on bail as CBI fails to file the chargesheet on the stipulated date.

October 28, 2013: Criminal case filed by Enforcement Directorate against 47 persons and 166 entities headed by Ramalinga Raju.

December 8, 2014:  Raju and three others accused in jail for six months.

December 23, 2014: Pronounce of the verdict postponed due to the humongous volume of documents presented.

March 9, 2015: CBI court extends the date of the verdict to April 9.

April 9, 2015: All 10 accused of fraud found guilty.