Are Satyam’s shareholders paying the price of land?

Are Satyam’s shareholders paying the price of land?
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First Published: Wed, Jan 14 2009. 12 55 AM IST

Updated: Wed, Jan 14 2009. 12 55 AM IST
The Satyam Computer Services Ltd saga has attracted comment that has chiefly focused on three angles: the ethical conduct of founder B. Ramalinga Raju; the negligence of the auditors, Price Waterhouse; and the role of independent directors. The whole discourse seems to be missing a critical link in the chain—politics.
It is interesting to note the almost deafening silence of the political establishment on this issue. Though the controversy began with Satyam’s 16 December announcement that it would buy two companies owned by Raju’s sons—a decision it killed in 12 hours—and snowballed into a scandal on 7 January, when Raju’s letter to the board of directors became public, the first reported statement by a politician came only on 10 January. PTI reported Bharatiya Janata Party leader L.K. Advani as saying in Ahmedabad that “the government needs to be alert on such frauds and should act fast to punish the guilty”.
The next statement came on 11 January, when CNN-IBN television channel reported that the Telugu Desam Party had demanded a white paper on the infrastructure projects the Andhra Pradesh state government awarded to Maytas Infra Ltd, one of the two companies Satyam had sought to buy.
Given the alacrity with which our political establishment raises a ruckus on every issue, it is surprising that there seemed to be no reaction from any political grouping for so long. One reason suggested is that all Andhra Pradesh political parties remained quiet to protect “Andhra pride”. This appeared to have some validity, given Raju’s strong Andhra cultural preferences. One former employee of an ex-Satyam group firm was quoted in this newspaper on 8 January as saying, “For Raju, family, caste and those who could speak Telugu came first. I am not saying he was not a professional, but other things being equal, he would look at things in that order.”
Land plays a key role in the Satyam saga. Both Maytas Infra and Maytas Properties Ltd dealt with land, one way or another. It has also been reported that the promoters of Satyam and of the Maytas firms had built up a massive land bank in and around Hyderabad. It has also been hinted that because Raju belonged to a farming family, he could never get over his fascination with land.
It defies imagination how one could acquire so much of such prime land without the involvement, or at least acquiescence, of political elements, given that land is a prime asset—politicians all over the world know this, and our politicians are certainly not an exception.
Maytas Infra won projects worth Rs14,000 crore in the last two years or so, including the Rs12,220 crore elevated metro rail project in Hyderabad and the Rs1,590 crore deep water port at Machilipatnam, as well as several irrigation, water supply and electrification projects. Consider the opinion of an established and recognized professional on the Hyderabad Metro Rail project—none other than E. Sreedharan, head of the Delhi Metro Rail Corp. Ltd (DMRC), which served as a project consultant to the Hyderabad Metro project. In September, Sreedharan wrote a letter to the Planning Commission expressing apprehensions about the project. He is reported to have written: “It is apparent that the build-operate-transfer operator has a hidden agenda, which appears to be to extend the metro network to large tracts of his private land holdings, so as to reap a windfall profit four-five times the land price.” Sreedharan further noted that the alignment of the metro lines was changed to ensure more profit to the bidders and that the contract “smelled like a political scam”. The only measures taken by the state government in response were to demand an unconditional apology from Sreedharan and remove DMRC as a project consultant. The Planning Commission said that Sreedharan’s concerns were misconceived.
Former chief minister N. Chandrababu Naidu presented Raju to the likes of former US president Bill Clinton as Andhra Pradesh’s “poster boy”. Current chief minister Y.S. Rajasekhara Reddy is no different. Political groupings of all shades have been beneficiaries of such frauds; without their support, frauds of this magnitude are impossible. Since these connections haven’t come to light as yet, politicians are playing it cool, making vague statements about government vigilance and prosecution.
The nexus between politics and business is vicious. Disciplining auditors and independent directors, important as they may be, is only scratching the surface. The real corrective measures lie elsewhere.
Jagdeep S. Chhokar is a former professor of organizational behaviour at the Indian Institute of Management, Ahmedabad, and one of the founding members of Association for Democratic Reforms (www.adrindia.org).
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First Published: Wed, Jan 14 2009. 12 55 AM IST