Satyam founder, B. Ramalinga Raju has been sentenced to 7 years rigorous imprisonment along with nine other accused. Raju and his brother B. Rama Raju have also been fined Rs. 5 crore each by special court.
Earlier in the day, a CBI special court in Hyderabad had found former Satyam chairman Ramalinga Raju guilty of fraud. All 10 accused in the case have been found guilty in a scam that has been dubbed as one of the biggest financial scams in the country’s corporate sector.
Satyam founder Ramalinga Raju had asked for leniency in sentencing citing health issues.
Sixty-year-old Ramalinga Raju, his brother, three former employees, the former CFO V Srinivas, the ex internal auditor and two PWC auditors have been found guilty on charges of cheating, fabrication of documents, desctruction of evidence and forgery.
Ramalinga Raju was kept in jail for two years four months as the prosecutors argued that if released, Raju would tamper with the evidence.
Unlike most financial frauds that happen in India where the technical details are seldom known, the Satyam fraud stands out. The Securities and Exchange Board of India (SEBI) has made public, a blow-by-blow account of how the scam happened.
The top management of Satyam Computer Services dressed up their accounts, balance sheets and profit margins to show a rosy picture of the company, in an effort to woo more and more investments from the public. Fixed deposit receipts of many banks were forged for the same purpose. This was done consistently over a period of six years from 2003 to 2009.
Additionally, they also prepared over 7,561 fake invoices, fake clients and fake projects. They even recruited more people to show that the “growing” company was in need of more staff.
For instance, in 2008-09 it showed its operating margin as 24% when the actual figure was only 3%. Their plan crashed when the company could not pay its employees their salaries.
On 7 January 2009, its chairman Ramalinga Raju wrote a letter of confession to the employees saying that the company ran for last six years on ‘asatya,’ falsehood. He revealed what he and his coterie were doing for the past six years.
As soon as the letter went public, he was taken into custody, the CBI charging him under sections 409 and 467 of the IPC - criminal breach of trust and forgery - both would attract life imprisonment. He was lodged in Hyderabad’s Chanchalguda Prison. In September that year, he was afflicted with hepatitis C which secured him a shift from the shady gaol to a posh NIMS hospital room.
All top level officers of the company washed off their hands by putting the blame solely on team Raju. The CFO said that he was looking into investor relations work and therefore did not notice the irregularity. A former CFO said that all the bank statements were in the custody of the Chairman and the Managing Director and that they did not have much access to it. The internal auditor said that they company’s financial team had assured him that the accounts would be reconciled.
The company’s top management officials made good of the falsified claims which in turn raised the share value of the company. They made crores of rupees by selling the shares of the company, which the SEBI in its investigation found. They invested the ill-gained money to buy land in Hyderabad. The market watchdog found the officials guilty of unfair manipulation of stocks and insider trading, and asked them to deposit, with an interest of 12%, the unlawful gains which it estimated to be Rs. 1850 crore.
However, the investigating officer of the CBI DIG VV Lakshmi Narayana said this about the master-mind behind the fraud: “There wasn’t any sense of regret in Raju. If the Maytas deal (which Satyam was to strike soon) had gone through, he would have cited recession and sacked employees and tried to fill in the gaps.”
Apart from SEBI and CBI, the Serious Fraud Investigation Office (SFIO) and Enforcement Directorate (ED) have also booked Raju.
It was not on legal front alone that Raju had to struggle. Hepatitis C and a serious liver disease took a toll on his health. He was also experimented with a drug that was not yet approved in India. “He had to take 14 injections week after week and, at the time, he couldn’t eat and was only on liquid diet. It was a tough phase but Raju was in touch with close friends. Early this year those drugs started showing results,” a relative of his had said .
A special court adjourned the much awaited judgment in the multi-crore rupee Satyam scam till March 9, 2015. The judgement of the case filed against Raju and his team by the CBI for, among others, criminal breach of trust was expected to be delivered during the last hearing on December 23, 2014.
Special judge BVLN Chakravarthi had postponed the verdict on March 9 and later April 9, citing voluminous documents of the case. Around 3,000 documents were marked and 226 witnesses examined during the trial that began around six years ago.
(At The Quint, we question everything. Play an active role in shaping our journalism by becoming a member today.)