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No truth from Satyam
September, 08th 2009

It has been said many times, but bears repeating, that when Indias fourth-largest IT company spiralled into spectacular riding the tiger anarchy, that was a big call for shifting corporate governance into higher gear in the country. Back then, in January, we had said that responding to the publics cry for justice with one inquiry after another would simply not suffice.

Even then, when the arrests of Satyams former CFO and the Raju brothers were being fted for their speediness, they were simultaneously thwarting the pursuit of justice, with Sebi having to file a local petition to interview the fraudsters.

Now that Ramalinga Raju is reportedly awash in special privileges in jailfrom a new badminton court to a daily dose of fish or meatwhile investigating agencies continue to scramble to get their act together, our fears seem to be more than justified. As FE reported yesterday, a lot of work is still pending with all the four agencies tasked to track the Satyam accounting fraud.

These agencies are: SFIO, Sebi, ICAI and CBI. To focus on the CBI case, despite filing a 6,500-page chargesheet against Raju and eight others for the Rs 7,800-crore fraud, it doesnt seem to have enough to book the former promoters of the company for issues like diversion of funds, their misappropriation or the independent directors role played over the years. Rajus confession still seems the strongest evidence against him.

In the interim, our columnists have emphasised both how important it is to make an exemplary case of Satyam and how imposing severe penalties is the most effective deterrent to accounting manipulation.

In addition, we should be focused on ways to improve the quality of firms financial reporting, whether by way of switching to IFRS or liberalising the rules governing stockholder litigation.

Here, we must make special mention of the accountants because corporate affairs minister Salman Khurshid was complaining last weekend about how ICAI has been delaying its final report on how the Satyam fraud unfolded. Again, as early as in January, commentators had pointed out how, if an auditor fails in his duty in India, he faced a maximum imprisonment of two years as against the US Sarbanes-Oxley Act that handed out imprisonment for 20 years.

Combine the fact that India has one of the poorest corporate fraud conviction rates in the world with that we have entered new waters with the Satyam case, and you have a lab case for why Satyam must be dealt with most efficiently.

All imperatives notwithstanding, nine months on, we still seem stuck with the bare bones of the Satyam saga. We dont, for example, yet know how Satyam ADRs worth $100 million were deployed or how funds were siphoned off between Satyam and its sister concerns.

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