BackMahindra Satyam sues former board, ex-staff, PW
Mahindra Satyam sues former board, ex-staff, PW
PremiumA file photo of MahindraSatyam Headquarters, Hitech City , Madhapur Hyderabad
Mumbai: Mahindra Satyam, formerly Satyam Computer Services, has filed a lawsuit against the past board of directors, certain ex-employees and the former statutory auditor Price Waterhouse for an accounting scandal that became the country’s biggest corporate fraud.
“We’ve suffered damages in the form of settlements on the class action suit filed by investors in the US and also the final settlement with Upaid, which I’ve just signed today. We’re well within our legal rights to claim compensation for this," chairman Vineet Nayyar said over phone.
Price Waterhouse said it was itself a victim of fraud.
“PW India is outraged that Satyam is attempting to shift responsibility to the auditors for the consequences of a carefully and deliberately concealed fraud that was undertaken at the direction of its own senior management," the company said in an emailed release. “The fraud perpetrated by Satyam was specifically designed to—and did—circumvent Satyam’s own internal controls and PW India’s audit process, and consequently PW India was a victim of Satyam’s fraud, and will defend itself vigorously against Satyam’s baseless contentions. PW India also confirms that it has filed its own civil suit against Satyam and certain members of its former senior management claiming compensation and damages."
Investors reacted favourably to the news, sending the firm’s shares 8% higher to ₹ 72.90 and parent Tech Mahindra Ltd 1% higher to ₹ 604.50, outperforming the Sensex, which lost 0.22%.
A software services analyst following the company with a foreign brokerage, who didn’t want to be named, questioned the rationale of the legal move.
“It wasn’t like the Mahindras were getting into a deal knowing everything was clean. It was a distressed asset they pursued and there is always risk associated with that. If the liabilities now turned out higher than anticipated, they’ve to live with it," the analyst said.
Satyam Computer’s former chairman and founder B. Ramalinga Raju had in January 2009 admitted to cooking the firm’s books to the tune of ₹ 7,136 crore by inflating cash and bank balances, adding non-existent accrued interest, overstating debtors’ positions and understating liabilities over several years.
After government intervention and an auction that also included L&T Infotech and B.K. Modi’s Spice group, Tech Mahindra’s bid was accepted in April 2009. The company was transferred to the Mahindra firm, after which it was then renamed.
Before the scandal broke out, Satyam was India’s fourth largest software services exporter by revenue. Apart from being listed on BSE and the National Stock Exchange, it was also trading on the New York Stock Exchange.
Raju, his brother and former managing director B. Rama Raju, and ex-chief financial officer Vadlamani Srinivas spent nearly three years in a Hyderabad jail before the Supreme Court in November 2011 granted them bail.
Asked why the firm was suing former executives and auditors three years after the fraud came to light especially when some of them may be bankrupt, Nayyar said legal recourse was being sought since the damages were only settled now. “Whatever the respondents are capable of paying, they should pay. Besides, Price Waterhouse isn’t a bankrupt company," he added.
Another analyst, also with a foreign brokerage, doubted the case would stand up in court unless there was some new and unknown information that could be held against the perpetrators of the fraud. “Even if you sue former employees and auditors, on what grounds are you suing the former directors. The board was incompetent, and at worst could be dismissed. One cannot sue on grounds of incompetence," the analyst said.
john.k@livemint.com
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