Government moves to clean up Satyam mess

NEW DELHI - The Indian government swung into action Saturday to deal with the perpetrators of the Satyam’s Rs.70-billion (Rs.7,000-crore) accounting scam, while the market regulator said it would seek the court’s permission to question the company’s founder.

On a day of quick developments, Satyam founder and former chairman B. Ramalinga Raju and his brother B. Rama Raju, who were arrested Friday night, were sent to jail till Jan 23.

On Saturday evening, Satyam’s former chief financial officer Vadlamani Srinivas was also arrested. He will be produced before a magistrate Sunday.

Market regulator Securities Exchange Board of India (SEBI) will now seek permission of the magistrate to record Ramalinga Raju’s statement in Hyderabad Monday.

SEBI chairman C.B. Bhave also met Corporate Affairs Minister P.C. Gupta here Saturday evening to discuss the ongoing investigations into the scam, a ministry official said.

‘The ministry and SEBI are jointly probing the Satyam scandal. Bhave has met the minister to discuss the developments that have unfolded of late,’ he added.

A SEBI team has been probing the fraud since Thursday and has checked the books of accounts at Satyam offices in Hyderabad.

Earlier Saturday, the VI Additional Chief Metropolitan Magistrate in Hyderabad sent the disgraced Raju brothers to jail till Jan 23. They will be lodged in Chanchalguda jail in the old city of Hyderabad.

The brothers have been charged with cheating, criminal conspiracy, forgery and criminal breach of trust, among others, after being grilled by the state’s Criminal Investigation Department (CID) officers for over three hours Friday night.

The magistrate rejected their lawyer’s plea to permit Ramalinga Raju to get admitted to a hospital in view of his ill-health.

‘Please permit my client to be admitted to a hospital,’ lawyer S. Bharat Kumar pleaded. He will now move court Monday for bail.

The government had intervened Friday to supersede the Satyam board. Announcing this, company affairs minister Gupta had said at a press conference: ‘The government should be allowed to appoint 10 nominee directors for the company. The new board has to meet within the next seven days.

‘The Company Law Board has already issued an order to the existing directors of the board restraining them from exercising their functions and the order becomes effective immediately,’ the minister had added.

Meanwhile, in Chennai, the Institute of Chartered Accountants of India (ICAI) said auditing firm PricewaterhouseCoopers (PwC), which had certified the accounts of Satyam Computer Services as ‘true and fair’, is bound to disclose all facts and cannot hide under the client confidentiality clause.

‘The confession of accounting fraud of a huge magnitude is an extraordinary situation. The auditor who certified the company’s accounts or the firm in which he is a partner cannot hide under client confidentiality clause,’ V. Murali, a member of ICAI’s central council of, told IANS.

ICAI’s Financial Reporting Review Board has issued a notice to PwC asking for details of the auditors who certified the accounts. The board will also look at Satyam’s audit systems and practices.

Satyam’s last balance sheet was certified by Srinivas Talluri and the 2006-07 accounts by S. Gopalakrishnan, both PwC partners.

‘We have also called for the working papers. Checking the audit working sheets as how bank reconciliation statement was prepared will throw more light on the accounting fraud,’ Murali said.

Incidentally, two PwC partners, Harinderjit Singh and Gopalakrishnan, are members of ICAI’s central council.