When B. Ramalinga Raju, the disgraced former chairman of Satyam Computer Services, wrote a letter earlier this month confessing to a massive fraud, he exculpated senior executives, independent directors and his own family members. He made just two exceptions: Chief financial officer Srinivas Vadlamani and statutory auditors Price Waterhouse. With reason, perhaps. Vadlamani is now keeping Raju company in jail, and Price Waterhouse faces a barrage of questions about its inability to detect the fraud.
As India Knowledge@Wharton recently wrote, Raju admits to having manipulated Satyam's accounts for several years. He says revenues have been overstated and profits inflated by more than US$1 billion. Worse, the company's cash reserve of US$1.2 billion is non-existent. (See Scandal at Satyam: Truth, Lies and Corporate Governance.) Recent news reports note that Satyam inflated employee numbers -- it had 40,000 employees rather than 53,000 as it claimed -- to siphon off more than Rs. 200 million (US$4.5 million) a month.
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