Reality Check India

Satyam past must be investigated

Posted in Uncategorized by realitycheck on January 8, 2009

For years we had a Solidaire black and white TV. The one with shutters and a lock. Occasionally, it would conk off and a bright straight line would appear on the tube. Once that happened, we had a trick. We would close the shutter (I know) and give it a little whack on the side then a big whack on top. For a long time, this would do the trick the picture would jump back to life. Everyone in the family knew it. It served us well, until one day..

I could not help but think of our family trick while reading about Satyams asset building exercise. Has this trick been used in the past ?

This is what I understand. For a deeper analysis Check out this analysis, which is the best I have read or heard so far.

Step 1 : You need to find a company willing to make a book entry receipt of a huge amount without actually receiving anything or far lesser. This company would have to then take on the task of cooking the books until the payment arrives. This is the delayed payments that Raju mentions in his letter.

Step 2 : Satyam would then show this investment as an asset while transferring the burden of continuing the fraud to the friendly company. As time goes by in a bull market – they can slowly make the books of the friendly company look better, for example by offering equity. Maytas plays in India and is well connected with politicians, so it is much easier for them to carry the burder of the scam. Satyam is watched by SEC and the pesky foreigners.

We ought to investigate all past purchases of Satyam like the famed 2000 Indiaworld deal ( Rs 500 Cr buy for a company making Rs 25 Lk profit and a bunch of web pages ). I know the founder Mr Jain is highly respected in India. But we cant fall prey to hero worship of entrepreneurs which got us into trouble in the first place. I do hope that nothing is found there but we must look. Also look at the SIFY sale and the way Satyam let go of an opportunity in a rights issue to the enormous benefit of a family member.

There is another trick that has worked in the past. Mr Raju started a textile company and suddenly declared it dead leaving a lot of people in the lurch. This is the quick exit trick. The Raju family is reported to be among the top 10 landlords in India today. Via Maytas they hold 7000 Acres and each member personally owns hundreds of acres in Southern and Western India. This does not come cheap. If Satyam goes under and the cash is missing, can we assume that the cash is in the land bank ?

I agree with what Mr Narayan Murthy said last night on various TV channels.

What is important is to see how the regulatory agencies handle this ?

If Mr Raju gets away with a fine of Rs 25 Crore and/or a jail term while keeping the land bank, then the world would derive its own conclusions.

Again quoting from the excellent analysis by Digitizing Thoughts. Raju might have confessed so his personal money in Satyam is secure. He would be out on bail in no time while Jethmalani, Jaitely and Singhvi can take over for a decade or so.

2. He has already introduced Rs.10 billion of own money into the Company. With increased shareholder activism, it had almost become certain that he will get out of the Company sooner than later. In case he had to go out, how to get back the Rs.10 billion of personal money left with the Company? Make a confession and repeat multiple times in the open letter that there is an unaccounted liability of Rs.10 billion so that that amount is secured for him, irrespective any legal tangles he gets into by the confession. This again, is a master stroke from Mr. Raju, in my view. Because, he is fully aware of the speed of legal process in India and so while the legal battles are fought with intelligent lawyers for 10 or 15 years, he can continue to enjoy the money and comforts.

Source : Digitizing Thoughts Blog

As Reason, a long time commenter said – maybe it is time we stopped pretending like we have institutions left in India.

This past year alone various institutions (Supreme Court, TRAI, COAI, CVC, etc) have been asked to prove their mettle. All have fallen woefully short. The CVC is being exposed in the way it deals with the magnificent spectrum scam. All have sulked into submission to the political class after making initial noises. The worst being the Supreme Court which seems to have voluntarily waived its right of US-style-strict scrutiny. Neither did it say what its own standards of scrutiny are. Where do we go from here ? No one knows. Now it is the turn of SEBI, ICAI, to step up and show us if they have any clothes on.

The complex interconnection of politics + landlords + entrepreneurs dominate the political landscape in India today. (Political clout might save the day ) Cash changes hands freely while the media is paid off in cash or in secular money.


I say we hold off on asking our soldiers to make the supreme sacrifice until we fix the house. Do you agree ? Dont we owe them that much ?

10 Responses

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  1. Barbarindian said, on January 8, 2009 at 5:12 am

    “I say we hold off on asking our soldiers to make the supreme sacrifice until we fix the house. Do you agree ? Dont we owe them that much ?”


    Before labeling our neighbor failed state/rogue state etc., we must first ensure damage by non-state actors of Indian origin are contained first.

  2. reason said, on January 8, 2009 at 6:06 am

    what did narayana murthy say on various channels yesterday?

  3. reason said, on January 8, 2009 at 6:30 am

    “…but meanwhile one of the theories that’s doing the rounds of the market is that Satyam indeed generated significant cash, which has been siphoned off to fund the promoter’s other business interests. Instead of disclosing this, Raju now says the cash was never there.”

    I think you wont get much luck trying to follow that money trail. This is a obvious thing and it is good to see livemint mentioning it. But i doubt if anyone else will dare to.

    The best you can get is a trial for accounting fraud, some bans on some audit firm from auditing selective industries, long speeches on the need for ‘reforms’, a long drawn trial that the media will lose interest the third day. And pretty soon you will also hear how good the guy is for having confessed – see dirty people like BJP’s bangaru laxman dont even confess, and we have here a heart of gold that sent confession by fax.

    let us get back to business. secular party needs to win the next elections.

  4. reason said, on January 8, 2009 at 6:41 am

    I was curious just what the venerable Times of india would have said on the matter because of the link you gave, and it turns out they have declared the man a ‘victim’ already –

    “This time, Raju had nothing and no one to turn to. His shares were a pile of paper, the land holdings a vast brown elephant. The son of the soil was ultimately done in by his overweening greed for land. ”

    see, the man has now nothing and no one to turn to. his land holdings are just vast brown elephant. dont ask where he got the money from to buy that land. he is a son of the soil too. Now get off you vultures, you got a faxed confession. just see that heart of gold.

    f*ck you people.

  5. reason said, on January 8, 2009 at 6:45 am

    just one thought though – the man’s personal safety may need to be ensured. India is a dangerous country and the secular party is beyond blemish.

  6. reason said, on January 8, 2009 at 11:50 am

    it is actually another big national interest item. i am not surprised it is not getting that kind of attention. its just that i cant keep off from it (for the record, i have nothing at stake in the company).

    we have a good list of ‘serial entrepreneurs’ in india who keep chugging on. SSI? kalpathi brothers? sterling? what should make us think that the system is not built and maintained for their benefit?

  7. B Shantanu said, on January 9, 2009 at 6:36 pm

    “I say we hold off on asking our soldiers to make the supreme sacrifice until we fix the house. Do you agree ? Dont we owe them that much ?”

    Well said RC.

  8. Kannan said, on February 3, 2009 at 12:15 am

    This is real indiaworld story in case if you never heard of it

  9. interesting indiaworld story said, on December 9, 2009 at 4:25 am

    I just read the “India World” story. It looks like Satyam Info was aware that it was only buying but the question is, it let media loosely talk of it as IndiaWorld… and blurring the important distinction. How else to justify the huge sum paid for it ? This must mean collusion. The new Satyam should fully investigate all this, otherwise I would suspect that they are still influenced by the old Satyam and have not come clean.

  10. […] 1 2009 : Satyam past must be investigated (2G scam ref) This past year alone various institutions (Supreme Court, TRAI, COAI, CVC, etc) have […]

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