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Trial opens over India’s ‘biggest corporate fraud’

Trial opens over India’s ‘biggest corporate fraud’
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First Published: Tue, Nov 02 2010. 12 13 PM IST
Updated: Tue, Nov 02 2010. 12 13 PM IST
Hyderabad: The trial opened Tuesday of the former head of leading Indian outsourcing firm Satyam, accused of staging the nation’s biggest corporate fraud in a case dubbed “India’s Enron”.
The declaration by Satyam founder and former chairman B. Ramalinga Raju in January 2009 that he had falsified profits plunged the Indian business world into turmoil.
“The court will likely issue summons to a list of witnesses to be heard,” Raju’s lawyer, Bharat Kumar, told AFP as legal proceedings got under way in the southern city of Hyderabad.
Raju, who faces charges including conspiracy, cheating and forgery, declared in a letter of confession that he had overstated profits for years and inflated the company’s balance sheet by more than a billion dollars.
He later backed down from the confession, but police maintain the letter was a “voluntary disclosure of fraud”.
Raju and nine other senior executives from the company — including his brother B. Rama Raju — were expected to appear in court on Tuesday, his lawyer said.
Special public prosecutor K. Surendra told AFP that paperwork on witnesses and documents being sought from the accused would be processed on Tuesday, with the court set to re-convene on 8 November.
The scandal at the Hyderabad-based firm is known as “India’s Enron” after the US energy giant that collapsed in 2001 in the wake of massive false-accounting revelations.
The hearing opened after India’s Supreme Court last week revoked bail granted to Raju on health grounds in August, saying the gravity of the accusations meant the bail order “could not be sustained”.
Raju has been undergoing treatment for hepatitis at a hospital in Hyderabad.
Federal investigating agency, the Central Bureau of Investigation (CBI), argued bail should be cancelled because Raju might influence witnesses and tamper with evidence.
The Supreme Court has ordered the lower court to complete the trial of Raju by 31 July next year.
Satyam, ranked as India’s fourth-largest outsourcer by revenue before the scandal, acts as a back office for some of the world’s biggest companies including Nestle, General Electric and General Motors.
Satyam was taken over in April by mid-sized software outsourcer Tech Mahindra, a unit of the tractors-to-holidays conglomerate Mahindra and Mahindra, which paid nearly $600 million for a majority share.
The company, rebranded Mahindra Satyam, announced a loss two months ago of 27.6 million dollars for the fiscal year to March as it reported its first results since the scandal.
“The patient has been revived and is convalescing. But it could be a year or two before the company will be healthy and running again,” Mahindra Satyam chairman Vineet Nayyar said at the time.
Analysts have been divided about Satyam’s future, with some saying the worst is over while others argue it could take a few quarters or even years of uphill struggle to fully emerge from the scandal.
Satyam’s stock plunged more than 90% when the scandal broke but recovered when a government-appointed board took charge and later chose Tech Mahindra as the new owners through a bidding process.
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First Published: Tue, Nov 02 2010. 12 13 PM IST