New Delhi: The Central Bureau of Investigation (CBI) will assemble a “multi-dimensional” team to probe the Rs7,136 crore fraud at software maker Satyam Computer Services Ltd.
CBI, India’s premier investigating agency, took over the investigation of the country’s biggest accounting fraud on Wednesday.
Jigsaw puzzle: A file photo of Satyam founder B. Ramalinga Raju (right) seen through a car windscreen as state criminal investigation department takes him in custody in Hyderabad on 18 January. Mahesh Kumar A / AP
“A joint consultative and coordinating mechanism is being worked out with concerned ministries, departments and institutions for providing necessary assistance to CBI,” a spokesperson for the agency said.
CBI took over the case one day before the Lok Sabha is to discuss the scam, which has shaken investors and raised questions over India’s corporate governance standards. Minister for corporate affairs P.C. Gupta is likely to reply to the discussion.
The investigating team that CBI is forming will be based in Hyderabad, home to Satyam, whose founder and former chairman B. Ramalinga Raju, brother and former managing director B. Rama Raju and former chief financial officer Srinivas Vadlamani are in a jail in the city after being arrested in connection with the swindle.
With the case being transferred to it from the crime investigation department of the Andhra Pradesh police, CBI can gain custody of Raju for up to nine days to question him over the scam. CBI officials who didn’t want to be named said records and other material associated with the Satyam probe were being taken over by the agency, which would register a case soon.
Raju was arrested after confessing on 7 January that he had been cooking the company’s books over several years by inflating revenue and profit and creating fictitious profits.
The Andhra Pradesh Police, the Serious Fraud Investigation Office, market regulator Securities and Exchange Board of India (Sebi) and the Institute of Chartered Accountants of India, the country’s main accounting body, and the Income-tax (I-T) department are involved in probing various aspects of the Satyam fraud.
A local court in Hyderabad on Wednesday allowed the I-T department to interrogate Raju on 21 February. Sebi officials questioned and recorded the statement of Raju and his brother for three days from 4 February in Hyderabad’s Chanchalguda jail.
Bail petitions filed by the Raju brothers and Vadlamani were dismissed by the court, which also allowed Sebi to question the former chief financial officer and former Price Waterhouse partners S. Gopalakrishan and Talluri Srinivas, also arrested in connection with the scam.
Satyam’s accounts are being examined by the audit firms Deloitte Touche Tohmatsu and KPMG, whose India chief operating officer Richard Rekhy said the restatement of accounts could take as long as six months. “It is not a one-year account, you have to go back three-four years...,” Rekhy said.
The Central government dissolved Satyam’s board and appointed directors led by Kiran Karnik, former president of the industry body National Association of Software and Service Companies, after the scandal broke. On Tuesday, the government decided to supersede the boards of Maytas Infra Ltd and Maytas Properties Ltd, firms promoted by members of the Raju family.
Maytas Infra shares rose Rs2.70, or 5%, to Rs56.70 on Wednesday as investors cheered the news. Maytas Infra said in a statement that it will contest the government’s move to remove the construction firm’s directors before the Company Law Board.
The Andhra Pradesh government said it will not act in haste against Maytas Infra. “The government will not cancel the projects awarded to Maytas just because the management is changing. The agreement has been signed with the company and it would be responsible for carrying the projects forward,” state finance minister K. Rosaiah said.
Among the main projects awarded to Maytas Infra and its joint venture partners is the Rs12,200-crore Hyderabad Metro Rail, for which financial closure is supposed to be achieved by March-end.
In a separate development, Union labour minister Oscar Fernandes said Satyam has 43,622 workers, citing the records of the government’s pension fund authority.
On Tuesday, corporate affairs minister Gupta told lawmakers that Satyam has 53,000 workers, adding that the government had no knowledge of bogus workers.
The Hyderabad-based company padded employee numbers to siphon off cash, a prosecutor alleged at a hearing last month.
Satyam employees earning more than Rs6,500 a month can opt not to join the government-run pension fund, according to the Employees’ Provident Fund Organization’s rules. Overseas employees of Satyam also aren’t required to join the pension plan.
Bloomberg and Reuters contributed to this story.