WEBCAST: Satyam scandal rocks India

WEBCAST: Listen to experts and journalists discuss the scandal and what it means for business in India, US and elsewhere. Wednesday, 11 pm-midnight NY time (that's Thursday 9:30-10:30 am India time). Listen live or to a recording:
http://www.blogtalkradio.com/saja/2009/01/08/Satyam-scandal-rocks-India-and-India-US-business

Speakers:
Naval Chopra, a London-based lawyer and expert on business acquisitions in India (calling from London)
Indira Kannan, US editor/correspondent, CNN-IBN and CNBC-India (calling from NYC)
Manjeet Kripalani, Mumbai/South Asia bureau chief, BusinessWeek  - read her Jan. 7, 2009, story (calling from Mumbai)
Stephanie Mehta, asst managing editor for technology and former international editor Fortune
CO-HOSTS: John Laxmi, SAJA treasurer and co-founder of a New York-based private equity firm (and SAJA treasurer) and Prof. Sree Sreenivasan, SAJA co-founder, Columbia Journalism School

Help us cover this story by posting updates and links, including its effect on US customers, clients, etc, below.

From note below: Satyam means "truth" in Sanskrit.

Just like the last thing an American economy reeling from recession needed was the $50-billion Madoff scandal, India's slowing economy now has its equivalent scandal, sending its stock market down seven percent as of Wednesday. From Sumeet Chatterjee's Reuters report:

The head of Indian outsourcing firm Satyam Computer Services resigned on Wednesday, disclosing that profits had been falsely inflated for years and sending its shares tumbling nearly 80 percent.

India's biggest corporate scandal in memory threatens future foreign investment flows into Asia's third-largest economy and casts a cloud over growth in its once-booming outsourcing sector.

The news sent Indian equity markets into a tailspin, with Bombay's main benchmark index tumbling 7.3 percent in a firmer session for world markets and the Indian rupee fell.

From Mohammed Hadi's "Heard on the Street" column in the Wall Street Journal, "The Shame of Satyam":

Fund managers dumped Satyam's shares in December after the company said it would buy two property companies part-owned by its founders. Those acquisitions, quickly abandoned, rang so many alarm bells that Satyam's U.S.-listed shares plunged as much as 60% in New York.

Wednesday's disclosure that those property deals were in fact a last-gasp attempt to fill a hole in its finances, falsely inflated for years by its founder and chairman, Ramalinga Raju, pays off on every bet made against the company.

The whole affair -- already being dubbed India's Enron -- throws India's corporate governance into sharp relief. That Mr. Raju thought it appropriate to spend $1.6 billion on two firms so unrelated to Satyam's business and in which he had a financial interest, without seeking shareholder approval, speaks volumes about his sense of what his shareholders would tolerate.

Read founder Ramalinga Raju's letter to board members, which outlines the scandal (PDF).

An Economic Times story that ties together the US and India connection (thanks to Jaya Kamlani for the comment below):

“Raju a feared man; earlier in US, now in India”

"Raju has certainly inflicted a huge blow to the India story on the global business arena and the companies across the world would be much more vigilant before engaging any Indian company for their business purposes," said an analyst.

Way back in 2004, American media had reported that it was not only dreaded terrorist Osama whom the Americans were afraid of, but Ramalinga Raju was a feared man too as millions of jobs were being outsourced to Indian companies like Satyam.

"Tables have turned upside-down now. The threat that Raju was to the US earlier is now a threat to the entire India Inc," brokerage firm SMC Global's Vice President Rajesh Jain told PTI. "Having been a job-creator for corporate India for years, Raju has now turned into a money-grabber through financial bungling and corporate governance malpractices," Jain added.

A note from SAJA treasurer John Laxmi, johnlaxmisajadisc[at]gmail.com:

For those who are not familiar with Indian languages, the word "Satyam,"
derived from Sanskrit, means "truth."

Falsification and inflation of profits were not tricks invented by Enron or Madoff. To learn about one of the earliest and most egregious profit-falsification by a publicly held company, read about the 1975 case of Tri-sure India (which I personally investigated).  Of course, India has seen
scores of Ponzi schemes among it's so-called "chit" funds.

Help us cover this story by posting updates and links, including its effect on US customers, clients, etc, below.