When Ramalinga Raju confessed to the monumental fraud he had perpetrated at Satyam early last year, a lot of people believed that he had taken money out of the company possibly to invest in real estate. This is the line that the Crime Investigation Department of the Andhra Pradesh Police took in its probe. It was subsequently asked to hand over the case to the Central Bureau of Investigation (CBI).
More than a year later, that trail seems to have gone cold. The CBI charge sheet makes no mention of any diversion of funds from Satyam. The scam was looked into by the Serious Frauds Investigation Office in the Ministry of Corporate Affairs also. But its findings have not been put in the public domain. So, not many people know what it has found out. The only real estate found was in closely-held Maytas Properties, which was developing a project called Maytas Hill County. The money there was all accounted for.
The evidence gathered so far seems to support what Raju said in his confession: He did not divert money from the company; he simply inflated the accounts to hide the small size of Satyam from customers. So, we have to believe the word of somebody who has admitted that he defrauded his employees, shareholders, customers, business associates and the taxman for seven long years.
Those who have looked into Satyam’s books post-scam say the money trail isn’t altogether dead. The CBI continues to look at the possibility of diversion of company funds. Investigators have come across some complicated real-estate deals that involve offshore accounts. What Raju confessed, they say, is true but there could be more to it.
There could be an indirect connection also, they say. Raju had raised money regularly by pledging the Satyam shares he owned. Had he not inflated the accounts, the Satyam share price would have been lower and he would have, therefore, got lesser money for those shares. Where has that money gone? Raju’s friends say it was pumped back into the company to keep the show going. Indeed, days after Raju’s confession, some of his private companies did write to Satyam demanding the money they had given as loans back. Some of that money, investigators say, may have gone to real estate. The angle is being looked into.
But nobody is sure if anything will come out of it. Raju, his brother Rama Raju, and his CFO Vadlamani Srinivas have been in custody for almost 15 months now. It is not clear what new information sleuths can unearth now. But there are some elements in the Satyam affair that don’t seem quite all right. To begin with, there was, from day one, excessive focus on the role of the two Pricewaterhouse auditors. That they goofed up and were negligent in their duty is evident, and they ought to be taken to task for that; but that they were hand in glove with Raju is yet to be proven. Their bail application was contested every time it came up for hearing. Why? What is it that the investigators didn’t ask after holding them in custody for a year?
Had their complicity been evident, Pricewaterhouse would have lost large chunks of its audit business. Companies re-appoint auditors at their annual general meetings, which happen three to six months after the closure of the financial year. Pricewaterhouse says that 97 per cent of the customers re-appointed it last year.
What about the independent directors on the Satyam board? Though they all resigned after the scam came to light, they seem to have got away with just a rap on the knuckles. Also, nobody from the company has been arrested apart from the two Raju brothers and Srinivas. In other words, the whole fraud was ideated and operated by the three men! This is just what Raju said in his statement. A scam of this magnitude requires a great deal of paperwork — orders have to be forged, the authorities hoodwinked, banks taken for a ride etc. It’s a little hard to believe that all this was done for seven years by just three men.
All this makes one ask if all the layers of the Satyam onion have been taken off. Have the various probes worked in a way that the whole truth comes out? When Satyam was put on the block, one Delhi businessman, who had a pile of cash in his bank, was very eager to bid. He does not understand much of software and technology but has innate intelligence and a sixth sense to spot assets that can be monetised. He was convinced that the money trail would lead to large real-estate assets. He even made secret trips to Hyderabad to find out the truth. That was his interest in Satyam. Closer to the bid date, he realised that the trail had got difficult to find. And that is when he began to lose interest.
If money was not extracted, Satyam would go down in history as the first scam which was carried out not for personal gains. Remember Nick Leeson? The “rogue trader” who brought Barings down? He too had said that he did it all for the good of the bank. Facts can often be stranger than fiction.
