SCAMSTERS INC.

The Government and market regulators got enough warnings about the accounting fraud at Satyam Computers but they turned a blind eye, a former senior bureaucrat has claimed.

EAS Sarma, former secretary in the Finance Ministry, hinted that cheap land acquired with political patronage is at the root of the accounting scandal at Satyam. Sarma alleged that he had written to ministries and the Securities Exchange Board of India (SEBI) but was unheeded.

The trouble in Satyam, India’s fourth largest IT services vendor began in December 2008, when its chairperson B Ramalinga Raju’s proposal to acquire two real estate firms owned by his family was rejected by angry investors.

Maytas Infra, a real estate firm owned by Raju’s son, has been awarded the Rs 12,000-crore project to build the Hyderabad Metro. The company has been given prime land in Hyderabad as part of the contract to build the Metro—a deal that is now raising eyebrows.

Sarma said when he heard about the land allotments given to Maytas he complained to the Government. “As soon as I saw the land allotment, I gave a notice to the Government saying this whole thing is illegal, irregular and improper,” he alleged.

“While I was doing this and opposing the Hyderabad Metro project, Satyam was trying to buy Maytas group. I wrote a letter to the Secretary of Company Affairs (Ministry) and also to the SEBI Chairperson,” said Sarma.

“Later, I wrote to Secretary, Economic Affairs, saying that SEBI has delayed the enquiry. People have been opposing it (land allotments) but political leadership and the government has been highly insensitive and indifferent.

“Local people have been opposing all this. We have written several letters and in some cases we have even gone to the court for judicial intervention,” he claimed.

Satyam’s founder-chairman Raju resigned from the IT major's board on Wednesday after admitting a multi-crore fraud in the company’s accounts. In a letter, Raju said that the company had fraudulently incorporated a non-existent cash component and inflated the bank balance to reflect Rs 5,040 crore (Rs 50.4 billion) as against Rs 5,361 crores (Rs 53.61 billion).

Raju said he planned to balance Satyam’s books by acquiring Maytas. "The aborted Maytas acquisition deal was the last attempt to fill the fictitious assets with real ones. Maytas' investors were convinced that this is a good divestment opportunity and a strategic fit. Once Satyam's problem was solved, it was hoped that Maytas' payments can be delayed. But that was not to be," he said.

The company has denied knowledge of Raju’s fraud and promises to cooperate with investigators looking at its accounts. Special teams of SEBI on Friday continued their probe for the second day into the Rs.70-billion Satyam fraud.

A three-member SEBI team headed by its southern regional manager A. Sunil Kumar was checking the books at Satyam offices here and Bangalore, while another team was looking into the records of Pricewaterhouse Coopers (PwC), auditors of the scam-tainted company, at its Jubilee Hills office.

Samuel Di Piaza, the CEO of PwC, the firm that audited Satyam’s accounts, is set to visit India to assess the impact of the scandal.

Source: IBN