Satyam scam: Ramalinga Raju gets 7 years in jail7 min read . Updated: 10 Apr 2015, 08:47 AM IST
Satyam founder, brother fined up to Rs5.5 crore each; eight others also get rigorous imprisonment
Hyderabad: A special court on Thursday sentenced B. Ramalinga Raju, founder of the erstwhile Satyam Computer Services Ltd, and nine others to seven years of rigorous imprisonment, convicting them in India’s biggest corporate fraud case after a marathon trial.
Ramalinga Raju and his brother Rama Raju, who was Satyam’s managing director at the time the fraud surfaced six years ago, were also fined up to R5.5 crore each, said K. Surender, senior counsel for the Central Bureau of Investigation (CBI).
Judge B.V.L.N. Chakravarthi ruled that the case involved “grave offences affecting the reputation of the corporate system of the country as a whole and the economy of the country".
“Justice demands that courts should impose punishment fitting to the crime so that the courts reflect public abhorrence of the crime," he observed citing another judgement in passing his 971-page order, which came at the end of a four-and-a-half-year-long trial in Hyderabad, where Satyam was based.
Raju, prisoner number 4148, and the other convicts were taken to Cherlapally central jail, 28km from Hyderabad, at 5.30pm after the judgement was delivered. Earlier in the day, the judge directed CBI to take the accused into custody after he found them guilty.
CBI charged the 10 suspects with collaborating to inflate revenue, fabricate invoices, falsify accounts and income tax returns, and forging fixed deposit receipts to paint a rosy picture of the company’s financials to deceive the public.
All the accused were found guilty of criminal conspiracy and cheating. The court found Ramalinga Raju and former vice-president of finance G. Ramakrishna guilty of destroying evidence. Ramalinga Raju and Rama Raju were found guilty of criminal breach of trust.
The convicts will appeal before a higher court, said E. Uma Maheswar Rao, the lawyer who argued Raju’s case during trial.
“We will appeal in next higher court, which is court of sessions," Rao said. V. Rami Reddy, a lawyer on Raju’s defence team, said the appeal will be filed in a week to 10 days after the team studies the judgement.
A total of 226 prosecution witnesses and 3,137 documents and 20 material objects were examined during the trial.
“It was a complicated case involving digital evidence, computer forensic techniques, audit procedures, accounting standards, revenue records, source codes, computer network logs etc.," CBI said in a statement.
K. Surender, the prosecution lawyer who argued on behalf of CBI, said the judgement sent out a strong message to perpetrators of corporate fraud. “If you are indulging in crime, you will have to face the consequences," Surender said, adding that he was satisfied with the judgement.
The fraud surfaced in January 2009 when Ramalinga Raju admitted in a letter to the company’s board and stock exchanges to have inflated revenue and profit over several years in an accounting fraud to the tune of ₹ 7,136 crore, making it India’s biggest accounting scam; he retracted the confession in the course of the trial. Subsequent investigations by CBI estimated the amount at ₹ 14,000 crore.
Ramalinga Raju and Rama Raju have spent 31 and 30 months, respectively, in prison, and will have to serve only the remainder of the seven-year term.
“My view is that Raju got off a little lightly. The very magnitude of fraud, and considering that he is the key accused, could have attracted maximum penalty which is life imprisonment and also higher fine," said Vaibhav Parikh, a partner at law firm Nishith Desai Associates. “It seems to me that the judge may have considered some mitigating factor for him like his past behaviour and his self-confession. He and co-accused will surely appeal to get lighter sentence. I think even the government will appeal to get him heavier punishment. I think this will go all the way to the Supreme Court."
Another lawyer concurred.
“The conviction is, in fact, terribly disappointing because the judge has not sentenced them to the maximum imprisonment prescribed by law," said Stephen Mathias, head of the technology law practice at law firm Kochhar and Co. “Some of the provisions under which they have been convicted carry imprisonment of up to 10 years... The fine of ₹ 5 crore pales in comparison to the losses suffered."
“The fact that Indian shareholders have not been compensated is another cause for grievance against the Indian legal system and its courts," Mathias added.
During his appearance in court on Thursday, Raju, who has been out on bail since November 2011 after spending about two-and-a-half years in jail during the trial, talked about his health issues, family and the good he has done for society, according to the court order.
The court also convicted B. Suryanarayana Raju, another brother of Ramalinga Raju, and Satyam’s then internal chief auditor V.S. Prabhakar Gupta and employees G. Ramakrishna, D. Venkatapathi Raju and Ch Srisailam.
The eight were ordered to pay a fine ranging from ₹ 27 lakh to ₹ 33 lakh each.
Judge Chakravarthi gave separate sentences for each of the different sections the accused were charged under. But because the sentences all run concurrently, the maximum sentence of seven years will be effective, lawyers and CBI officials explained.
“For a corporate fraud, we hardly have conviction in India. This is one of them," CBI’s Chandrasekhar said. “It will be a deterrent for all corporates."
Satyam was sold to Tech Mahindra Ltd in April 2009 in an auction overseen by government-appointed directors and rebranded Mahindra Satyam. It merged with Tech Mahindra in June 2013.
“We were asked by the government, and we were successful in saving the company," Housing Development Finance Corp. Ltd chairman Deepak Parekh said by phone on Thursday. “The rest (is for) the legal people and courts to decide. I haven’t gone through the judgement and (there is) nothing for me to comment."
Parekh was one of the government-appointed directors who presided over the auction that rescued Satyam from going under.
“Satyam is an exemplary case where the government of India, through the department of company affairs, intervened and ensured that the company did not fail and become bankrupt due to the fraud perpetuated by the promoters," said Rajesh Narain Gupta, managing partner at Mumbai-based law firm SNG and Partners.
“The judgement given by the court will have far-reaching consequences in checking corporate frauds and shall also act as a severe deterrent. However, the litigation time could have been curtailed in this case," he said.
Outsiders, including the media, were barred from entering the court hall, and lawyers and CBI officials emerged from the sweaty courtroom from time to time to update journalists on the developments inside. Only the accused, defence and prosecution lawyers, and CBI officials were allowed access.
Ramalinga Raju, dressed in a crisp blue shirt and dark trousers, seemed relaxed as he talked to relatives and friends with a smile on his face after the verdict was delivered. His brother Rama Raju also smiled as he talked to well-wishers, who were later allowed to go inside the court room.
Relatives of Talluri, the Price Waterhouse auditor, broke down in the corridor outside the court hall after the judgement was delivered around 2.40pm.
Price Waterhouse, which was the external auditor of Satyam, said on Thursday that it was “disappointed" by the conviction of its former employees.
“As we have said many times, there has never been any evidence presented that either of our former partners S. Gopalakrishnan or Srinivas Talluri were involved in or were aware of the management-led fraud at Satyam. We understand that Gopal and Talluri are considering filing an appeal against this verdict," the accounting firm said in statement.
This is not the first conviction for Raju, who built Satyam into what was billed as India’s fourth biggest software services provider before the scandal surfaced.
In December, an economic offences court handed Raju and three others—Rama Raju, Srinivas Vadlamani and former whole-time director Ram Mynampati—a six-month jail sentence and a total fine of ₹ 10.5 lakh in six cases filed by the Serious Fraud Investigation Office.
Capital market regulator Securities and Exchange Board of India in July last year barred four former Satyam executives—Ramalinga Raju, Rama Raju, Srinivas and Gupta—from the capital markets for 14 years, and ordered them to pay ₹ 1,848.93 crore with 12% interest from 2009 (totalling about ₹ 2,958.29 crore) for pocketing “wrongful gains" in share transactions. The accused have challenged the Sebi order.
The Enforcement Directorate (which investigates foreign exchange violations) has also filed a chargesheet against 213 people, including Ramalinga Raju, and 166 firms, including Satyam Computer, under different provisions of Prevention of Money Laundering Act and attached different properties belonging to them.
Dhanya Skariachan in Bengaluru and Viswanath Pilla in Hyderabad contributed to this story.