India Inc.’s biggest corporate fraud will not be cracked open completely soon. The scam, which came to light when Satyam’s erstwhile chairman B. Ramalinga Raju wrote a confession letter in January, has layers of complexity. The decoding of the biometric laptops used by Raju and his team, screening of the internal financial software of the company and minutes of the board meetings for last six years, scanning of papers of 300-odd companies created by Raju and his family and scrutinizing the land records under these companies will keep the Central Bureau of Investigation (CBI) on its toes for a few months.
The probe initiated by the Crime Investigation Department (CID), the Serious Fraud Investigation Office (SFIO) and Institute of Chartered Accountants of India (ICAI) was handed over to the CBI in February. The Securities and Exchange Board of India has its own investigation team going through the books of the company with a fine-tooth comb.
So far, investigators have managed to find out how accounts were manipulated by Raju for the past six years. CBI will file its chargesheet in April, failing which Raju and others will have to be released from the prison. A senior CBI official, who didn’t wish to be identified, confirmed to Business Today that Raju seems to have come clean in his confession letter except for his statement about “not (having) benefited in financial terms on account of inflated results”. “We are yet to establish if there was any diversion of funds from Satyam to any of Raju’s entities. This will take some time to investigate,” added the CBI official. Till now, the agency found that some of the documents of 300-odd companies floated by Raju contained land records and names of land mafia agents in Hyderabad, indicating that it may not be just an accounting fraud.
It appears that Raju’s con game started in April 2002, at a time when the IT companies were on the radar of foreign investors through newly-listed American Depository Receipts (ADRs). Then, Raju decided to maintain two subaccounts under a single bank account of the company. The main bank account was controlled by Raju and his cronies and the statements of the subsidiary account were under the finance and account reconciliation (FAR) team. So, at any given time, the accounts team would receive two bank statements for the same account—a genuine set of statements from the bank and a second set of statements provided by Raju and his team.
More often than not, the finance team had to accept the bank statements given by the promoters, which were manipulated as the figures didn’t always reconcile with the actual statements received by the team. Even the auditors relied on the documents supplied by Raju instead of going for a third-party verification of document. While screening through the minutes of some of the board meetings, investigators found out that the total audit fees paid to PricewaterhouseCoopers for its domestic and international accounts was around Rs 7 crore, almost double the figure mentioned in the balance sheet.
Here’s a closer look at the Modus Operandi of Raju.
Under the scanner