Risk Management

Indian Cops Cuff Confessed Fraudster

The ex-chairman of Satyam Computer and his brother are charged with making a false $1 billion cash entry. Meanwhile, the firm's just-resigned CFO r...
Stephen TaubJanuary 9, 2009

The former chairman of Satyam Computer, who admitted last week to cooking the Indian outsourcing firm’s books, was arrested Friday, the Associated Press reported.

B. Ramalinga Raju, who founded the firm, and his brother, B. Rama Raju, were arrested in the southern city of Hyderabad, according to the AP, citing S.S. Yadav, the top police official of Andhra Pradesh state, where the company is headquartered.

In a letter to the Bombay Stock Exchange, the former chairman admitted on Wednesday that he created a $1 billion cash entry on the firm’s books. The fraud, he wrote, “attained unmanageable proportions in size.” And he compared his own position as CEO of a fraud-infected company as having been “like riding a tiger, not knowing how to get off without being eaten.”

Meanwhile, the timesofindia.com reported that Srinivas Vadlamani, Satyam’s former CFO, attempted suicide early Friday morning, according to local reports. He had submitted his resignation Thursday. The Website conceded that the suicide attempt could not be confirmed.

The Website also reported that in September, Vadlamani suddenly sold 92,358 shares of Satyam stock. When quizzed, he said he needed the money because he was building a house and could not manage without liquidating his ESOP holdings, according to the report.

The Raju brothers face up to 10 years in prison, according to the AP. They reportedly are being investigated for cheating, forgery, criminal breach of trust, and falsifying documents.

The AP also reported that several investors in Satyam were considering suing PricewaterhouseCoopers, the firm’s independent auditor.

PwC said in a statement that it had worked “in accordance with applicable auditing standards and were supported by appropriate audit evidence.”

“Given our obligations for client confidentiality, it is not possible for us to comment upon the alleged irregularities,” the statement added.

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