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Satyam Computer settles Aberdeen UK claim for $68 mn

Settlement is the last of outstanding litigations filed against it in foreign courts following an accounting fraud
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First Published: Thu, Dec 13 2012. 10 06 AM IST
The claims included certain allegations of fraudulent misrepresentations said to have been made by the former management of Satyam Computers in London. Photo: Mint
The claims included certain allegations of fraudulent misrepresentations said to have been made by the former management of Satyam Computers in London. Photo: Mint
Updated: Fri, Dec 21 2012. 09 05 AM IST
Chennai/Hyderabad: Satyam Computer Services Ltd, rebranded Mahindra Satyam, has settled claims by Aberdeen Asset Management Plc for $68 million, resolving yet another suit against the company in advance of a merger with parent Tech Mahindra Ltd.
Mahindra Satyam informed BSE it entered into a confidential agreement to settle claims brought in a London court by Aberdeen Global and 22 other funds managed by Aberdeen Asset Management and its units.
The claims included allegations of fraudulent misrepresentation said to have been made by the former management of Satyam Computer in London and relied upon by the claimants’ investment manager and communicated in meetings said to have taken place in London.
The claimants said they suffered losses of an estimated $298.34 million and additional consequential losses. The claims have been fully disposed of with the payment of $68 million.
“One more claim which has been there on Satyam has been resolved now. This is good news for the company before it merges with Tech Mahindra,” said Ankita Somani, research analyst (IT and telecom) at Angel Broking Ltd. Somani said the latest settlement will have an “impact on the cash the company is holding now” although the settlement amount is relatively “small” compared with what was claimed.
Tech Mahindra and Satyam Computer are due to merge their operations pending approvals by the Andhra Pradesh and Bombay high courts.
Satyam Computer’s stock fell 0.96% to Rs.102.80 on BSE on Thursday. Tech Mahindra’s stock rose 0.67% at Rs.916.90. The benchmark Sensex dropped 0.65% to 19,229.26.
The Aberdeen complaint in the UK was initiated in the commercial court in London by Aberdeen Asset Management on behalf of 23 claimants representing 30 funds. Mahindra Satyam had said in its second-quarter results announcement that it was contesting the jurisdiction of the court.
With this, the company has settled all outstanding litigation brought against it in foreign courts in wake of an accounting fraud at the firm.
Satyam Computer Services was gripped by crisis after founder-chairman B. Ramalinga Raju confessed in January 2009 to having misstated the accounts to the tune of Rs.7,136 crore over several years. Satyam was subsequently purchased by Tech Mahindra in an auction overseen by government-appointed directors and rebranded Mahindra Satyam.
Mahindra Satyam had settled the class action suit on 27 July with Aberdeen Claims Administration Inc. that represented 20 investors, who invested in the company’s American Depositary Shares and common stock. They claimed to have suffered losses of over $68 million. Mahindra Satyam deposited $12 million in an escrow account as part of the settlement.
The Hyderabad-based information technology services provider settled for $125 million in a class action suit filed by US-based investors who purchased the company’s securities and incurred losses after the Satyam scandal.
It settled a US Securities and Exchange Commission (SEC) investigation into the accounting fraud perpetrated by the company’s former management for $10 million in April last year.
Mahindra Satyam also reached a settlement with mobile payments solution provider Upaid Systems Ltd for $70 million.
Mahindra Satyam has been battling a spate of cases in the Indian courts, which Somani earlier described as a “legal overhang on the stock”.
The company has an ongoing legal battle with the income tax department and has furnished a bank guarantee of Rs.617 crore on the orders of the Supreme Court.
The Andhra Pradesh high court recently stayed an order of the Directorate of Enforcement (which investigates foreign exchange violations) that sought to attach Rs.822 crore in fixed deposits of Mahindra Satyam.
“One by one, the company is resolving (outstanding legal issues). It is positive for the stock. Things are moving. Street expectations are that the court will rule in favour of Mahindra Satyam in the income tax case,” Somani said.
Some Satyam shareholders who were opposed to the merger swap ratio of 2:17 (two shares of Tech Mahindra for every 17 shares of Satyam Computer) took the company to court recently. The Andhra Pradesh high court last week appointed an independent auditor to scrutinize the scheme of amalgamation of the two IT firms. Some 37 companies that allegedly gave advances to Satyam Computer during Raju’s time at the helm also took Mahindra Satyam to a local court in Secunderabad over repayment of Rs.1,230.40 crore lent by them. Mahindra Satyam also sued the former management of the company and the former statutory auditors for financial fraud and “negligence in performance of duties”.
Various cases related to the fraud are currently being investigated by the Directorate of Enforcement, Central Bureau of Investigation, Serious Fraud Investigation Office, Registrar of Companies and other government agencies.
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First Published: Thu, Dec 13 2012. 10 06 AM IST