Three days after Satyam Computer founder B Ramalinga Raju admitted to fraud, government agencies have decided to act in unison to steer the company out of the debris of destroyed credibility and empty coffers.
The ministry of corporate affairs and Securities & Exchange Board of India, whose top office bearers met in New Delhi today, have decided to take “coordinated action”. One of the first decisions they will need to take is on a letter received from US-based Lazard Asset Management LLC, Satyam's largest shareholder with 7.4 per equity, seeking a seat on Satyam’s new board.
“Sebi Chairman C B Bhave met the secretary and minister of corporate affairs to apprise them of the investigations and exchange information,” said a senior ministry official.
The ministries of corporate affairs, finance and law, and the Prime Minister’s Office are together reconstituting the company’s board. Since the new board has to have its first meeting within seven days, the hunt is on for suitable directors.
“It could happen any time,” said the ministry official. The new board members could be from any field. However, the government is unlikely to plump from anyone with links to the information technology sector.
The government yesterday superseded the board of Satyam and decided to appoint 10 nominee-directors. The new board will take a decision on a new management team.
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Sebi said it would soon appoint an independent auditor to review the accounts and balance-sheet prepared by Satyam’s statutory auditor, Price Waterhouse.
The Serious Fraud Investigation Office today started preliminary inspection of Satyam’s books and of related eight companies under Section 209A of the Companies Act. This will form the interim report of the government, based on which comprehensive investigation will be carried out under Section 235 of the Companies Act.
RAJUS IN CUSTODY
Ramalinga Raju and his younger brother B Rama Raju were today sent to judicial custody till January 23. The Criminal Investigation Department (CID) of the Andhra Pradesh police produced the brothers before VI Metropolitan Magistrate Radha Krishna at his residence in connection with the Rs 7,800 crore window dressing of accounts. The magistrate sent the two to the Chanchalguda jail.
The CID personnel are also understood to have arrested Srinivas Vadlamani, Satyam's chief financial officer till the other day, and are interrogating him, besides filing a case against Price Waterhouse.
With Ramalinga Raju's blood pressure fluctuating, the magistrate directed the jail officials to constantly monitor his health.
Earlier in the evening, Ramalinga Raju's counsel Soma Bharath Kumar requested the magistrate to order the police to send his client to a hospital as he is diabetic and has high blood pressure, which the magistrate denied. The counsel said he would try for bail on Monday.
An hour before the Rajus were produced before the magistrate, the top officials of the Andhra police and the intelligence chief met Chief Minister Y S Rajasekhara Reddy and briefed him on the Rajus’ arrest. Reddy, in turn, updated the Prime Minister over the phone about the measures that the state had initiated after Raju’s revelations.
LAZARD EYES BOARD
US-based Lazard Asset Management, Satyam's largest shareholder with a 7.4 per cent stake, has sought a seat on Satyam’s board. Corporate Affairs Minister Prem Chand Gupta said the government had received a letter from Lazard which "was being looked into".
Lazard has limited operations in India in investment banking and has just set up a private equity team. The employees of its investment banking team in India said they did not know about the letter.
Government-owned Life Insurance Corporation is another large shareholder with 4.34 per cent. When asked about its interest in joining the new board, LIC Managing Director Thomas Matthew T said: “We are positive about the company’s prospects. LIC is examining the situation and would proceed accordingly as things progress.” The corporation believes that the steps taken by the government will restore investor confidence. “The government will take the final decision on the issues relating board positions,” the MD added.
Satyam's special economic zone in Tamil Nadu has run into rough weather. Besides, the government plans to probe the land dealings of Maytas Properties and may stop its expansion in Tamil Nadu.
NOTICE TO AUDITOR
The Institute of Chartered Accountants of India, which regulates the chartered accounting profession, has issued a showcause notice to Price Waterhouse, the firm that audited the books of Satyam.
“Based on media reports and Raju's letter, we have asked the audit firm to justify its stand,” said ICAI President Ved Jain. The firm would send the notice to the auditors who would have audited the books of Satyam and the individuals would have to declare that they indeed have done it. Only then would the ICAI disciplinary committee proceed against them, added Jain.
S Gopalakrishnan, a partner with Price Waterhouse, who signed the auditor’s report in financial years prior to 2007-08, is part of ICAI’s general council and also a member of the committee on ‘capacity building of CA firms’.
When asked whether the institute would seek Gopalakrishnan’s resignation from the council and committee membership, Jain said, “I have to bring him (Gopalakrishnan) to book before we think about removing him from the committee or the council.” He added that Gopalakrishnan would not attend any of the council’s meetings where Satyam is discussed.