Satyam Stock Scandal
Satyam Computer Services Ltd. (trading as SAY on the New York Stock Exchange) has collapsed tonight after their former chairman admitted to inflating the company's profits for "several years".
Shares of the company have collapsed on the Bombay Stock Exchange - at last check, the shares were down over 70% on the day. Things are so bad that the entire Bombay index has been pulled down over 5% on the news.
B. Ramalinga Raju resigned as chairman of the company after detailing the fraud.
The Bombay Stock Exchange released a letter written by Raju titled "To the Board of Directors". Raju starts out the letter by professing his "deep regret" and "tremendous burden that he is carrying on his conscience". He then details the fraud - here are some of the details:
1. The company's cash balance was inflated by over $1 billion dollars.
2. There was an accrued interest of almost 4 billion rupees that was apparently "non-existent".
3. There was an "understated liability" of 12.3 billion rupees on accounts that were arranged by Raju.
4. Debtors position was overstated by almost 5 billion rupees.
5. Q2 revenues were stated as being 27 billion rupees with an operating margin of 6.49 billion rupees. In fact, the true numbers were: 21.12 billion rupees with an operating margin of 610 million rupees.
Raju then goes on to point out that he hasn't sold a share of the company over the past 8 years, except for philanthropic purposes. He also declares that he did not personally benefit from the fraud, and that he was simply trying to "keep the wheel turning".
Satyam is a huge company with tens of thousands of employees. The company provides "information technology and business process outsourcing services" to many companies, including numerous Fortune 500 companies.
We'll keep an eye on this story. This is huge news in other parts of the world right now, especially in India, where the company is based.
Filed under: Stock Market Scandals
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