Satyam Scam: Why Was It Not Added To The Bad Boy Billionaries
In 1987, Hyderabad based IT company, Satyam Computers was established by two
brothers -Ramalinga Raju and Rama Raju. Company was listed in BSE in 1990-91 and
was supposed to be a jewel of IT companies. But in reality, company is an
outcome of crime.
It's known as Satyam Scam - India's one of the largest financial scams, which
was about to be included in the series - BAD BOY BILLIONARIES, India's popular
series. But, chairman of Satyam computer services - Ramalinga Raju, filed a
petition in high court of Hyderabad against the series - stating that if the
scam will be included in the series it will affect his reputation.
What Made The Company, A Scam?
Satyam computers was one of India's fastest growing companies but boom in real
estate derived the mind of Ramalinga towards it as real estate rates were
increasing rapidly. As a result, Ramalinga started purchasing properties in
different states of country on the names of his family members. This continuous
purchasing of properties gave rise to this scam.
When he needed more money to buy property, he started manipulating financial
statements of his company and started misrepresenting the accounts in front of
boards, stock exchange, regulators, investors, and other stock holders. All this
badly inflated company revenues, profits, interest liabilities and cash balances
and pretended that company was growing rapidly which leads to the rise of share
prices of the company, so the brothers started selling these shares and taking
loans on rest of the shares in order to buy more properties which was bought on
the names of workers of their farm, whom he has made the directors of his
Ramalinga Raju even had internal information of Hyderabad metro route, so he
bought the land nearby the metro route to earn money. He printed fake sale
invoices of company to show its growth, he showed the increasing sales but was
unable to show profits, so he made fake bank statements and pretended that he
has cash reserves in the banks and attracted many investors by his lies which
again lead to the increase in share prices of Satyam and he kept on investing
money in real estate by selling shares. Slowly gap increased in original and
fake figures which turned out to be a huge amount.
Because of 2008 recession there was cheapness in real estate and the plan of
selling properties on higher prices to reduce the gap of company's actual and
fake figures was a flop. Even all other plans were flopped like selling Matyas
company to Satyam computers in Rs.7800 crores which was the last plan of the
Ramalinga Raju and that caused a major drop in stocks of Satyam. In 2009
Ramalinga Raju confessed that Satyam computers are manipulating financial
statements of the company.
Decision Of The Court:
After the confession, special court of CBI granted 7 years regress imprisonment
to brothers with a fine of Rs 5crores .7 others also got the imprisonment with
the fine of 20-25 lacs
After the scam Government of India and SEBI were cautious and made an obligation
over companies that they should be changing their auditors every 10 years.
Law Article in India
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