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The Satyam Scam

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The Satyam Scam – India’s Biggest Corporate Fraud

The success of web series like Scam 1992 & Bad Boy Billionaires tells us 1 thing. That we all love a spicy financial drama. It’s fun & entertaining to watch them being played out on the big screen with great actors like Pratik Gandhi & Vijay Mallya. But the people affected by these scams are very, very real. So let’s talk about 1 of the biggest corporate accounting scams in India that affected 1000s & 1000s of people in the early 2000s – “The Satyam Scam”.

The Satyam Scam – What happened ?

Satyam Computer Services Image for the blog The Satyam Scam
Satyam Computers

It all began with Satyam Computer Services & its then Chairman & CEO, Ramalinga Raju. The company mainly dealt with the IT & computer services sector. Raju had been manipulating numbers in the balance sheets to secure crores & crores of money to inflate the value of the company. Allegedly, there were false invoices & fake bank statements for years, all to show higher revenues & profits. Which in turn, affected their stock price. By the end of it, Satyam’s accounting fraud allegedly ran up to over Rs. 7000 crores. With some estimates going as high as Rs. 9000 crores. It deflated the national market by 1000s of crores, with losses to the investors & the general public.

Even the auditors, people whose job it is to make sure that the company’s financial statements are on the up & up didn’t catch any of it. The company was valued at $ 78 million, but according to a lot of reports, they projected it at $ 1.1 billion. According to the CBI investigations, 1000s of innocent people invested in what they thought was a great & thriving company. But only to lose out when the scandal came to light.

So how did Ramalinga Raju made such a huge scam ?

Let’s go back to the beginning. The company was started by two brothers, Rama Raju & Ramalinga Raju in Hyderabad in 1987. It became a listed company with the Bombay Stock Exchange in 1991. In the years that followed, the company was climbing the ladder of success, with Ramalinga taking the helm as chairman in 2006. To the market, during the time that Ramalinga was chairman, it looked like Satyam Computers was a steady & rising business. The stock price soared & the brothers started cashing out. They use this money to secure bank loans. The 2 brothers then invested in properties across the country. SEBI’s probe, later on, reported that there was an excess shown to be Rs. 12000 crores. But we’ll know that wasn’t the case.

The Scam

Now, while some of the brother’s real estate ventures did manage to turn a profit. Some of the money was put back into Satyam computers. The brothers started allegedly manipulating more than just bank statements & invoices. They started showing higher operating costs & thereby higher profits. How they did this seems fairly simple. Most companies including Satyam, make use of an Enterprise Resource Planning System (ERP) for accounting. It’s a system that runs on a central, single collection of data. Usually, this helps to keep things streamlined rather than using multiple books of numbers & information that could lead to multiple places of human error. Also, the software usually only tracks data that the users input.

The Satyam Scam / Loophole in the system

So, it’s pretty easy to leave things out. Because the software wouldn’t know that they’re missing it. Since all the data was held in 1 database & the data could so easily be manipulated at the same time. It’s assumed that it was this loophole that the brothers took advantage of. It’s claimed that both brothers conspired to massively increase their revenue. Again, they did this through years of balance sheets, Profit & Loss statements & annual reports. They even had fake salary accounts & inflated bank statements to dupe investors. With all of this, their stock price just kept going up.

The Satyam Scam The Role Of PriceWaterHouseCoopers

PriceWaterHouseCoopers, were the auditors of the Satyam companies. They were supposed to verify all of these documents. But it doesn’t look like they did too good a job. By many estimates, around 7561 fake bills were created. The auditors didn’t spot them for almost 8 years. Physical verification wasn’t done either. They eventually converted all of this money into a fixed deposit account. According to earlier reports, the value was estimated to be around Rs. 5000 crores. While the company was doing well, Ramalinga Raju wanted to take advantage of the boom in the real estate sector. So, he bought land in multiple cities.

Maytas Infrastructure & Maytas Properties

During this time, he also founded Maytas Infrastructure & Maytas Properties. It’s just “Satyam” spelled backward. The ownership of both companies was in several of his family members’ names & so it was here, that the actual scam began. He overextended himself in buying properties & needed more money. So he turned to his other company, Satyam Computers & began manipulating books. The stakeholders, investors, partner companies & even most of his employees were none the wiser. But then, the 2008 recession hit. Real estate prices were at a then all-time low. That is where everything started to unravel.

The Satyam ScamThe Fall

The 2008 market crash is still reported as 1 of the worst in human history. It affected the world economy & led to massive losses. Banks couldn’t sustain their house loans. Investment firms began to crumble. Stocks just started plummeting. Companies across the world started suffering. Satyam wasn’t spared either. With their real estate holdings starting to deplete, the brothers were bleeding capital. So, they were in real trouble.

As with most entrepreneurs & investors across the world worried about their wealth. The board of directors at Satyam started demanding that the fixed deposits be placed into safe & profitable ventures. The brothers offered to invest in Maytas, owned by their own family & themselves. This didn’t sit too well with the board. At 1st, the board approved the move. But then, it was found out that Maytas had incurred losses during the housing crash. So, they started taking a closer look at everything.

A lot of questions arised

More & more questions about all the statements, invoices, the projected profits were being raised. They started finding a lot of inconsistencies. The brothers weren’t able to answer any of the questions. The board just wouldn’t let up the pressure. So finally, on 7th January 2009, Ramalinga Raju saw no way out. He wrote down a 5-page confession of the entire fraud. “It was like riding a tiger without knowing how to get down, without being eaten”. Raju said in 1 of his confession letters.

The Aftermath

Once the brothers confessed, a CBI investigation was conducted. Years of fraud were revealed, once the brothers confessed. Stock prices started falling. On 28th October 2013, the Enforcement Directorate filed a charge sheet against Raju & 212 others involved in the scam. On 9th April 2015, Ramalinga Raju & his brother were sentenced to 7 years in prison & fined 5.5 crore rupees. In January 2018, PriceWaterHouseCoopers was banned from auditing listed companies in India for 2 years for its alleged role with Satyam Computer Services by India’s Capital Market Regulator. PWC has come on record & said that they had no knowledge of any wrongdoing & that they weren’t part of this scam. The Regulator’s order was later overturned. But the Indian wing of PWC was fined 6.6 million dollars $ by the SEC (US Securities & Exchange Commission) for not following the code of conduct & auditing standards.


Tech Mahindra took over Satyam Computers. As per Business Standard, according to the prosecution’s case, ICICI Prudential Life Insurance suffered the highest loss of Rs. 698.67 crores. Followed by HDFC Standard Life Insurance at Rs. 218 crores & there were many others. The aftermath of the scam left long-lasting consequences for a lot of people. The Indian government & SEBI took various steps to tighten the laws & protocols so this never happens again. Several new regulations were added under the Companies Act of 2013. SEBI amended Clause 49. So now companies are now required to change their auditors every 10 years. Several other protocols & safety measures enacted were enacted. And What at the time was 1 of India’s most devious & massive scams is now etched into our history books as a cautionary tale for anyone who’s looking to do the same.

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