Accountancy Fraud of Satyam, India

Accountancy Fraud of Satyam, India - Fundamentals of...

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Unformatted text preview: Fundamentals of Financial Management - Fall 2010 Corporate F raud Assignment By: Mohammad Akrama Dahlkemper School of Business Gannon University Satyam Computer Servises Ltd. is a consultancy and information technology services company based in Hyderabad, India and founded in 1987 by Mr. B.Ramalinga Raju. The company went public in 1992. The company offers has various other SBU’s such as Maytas Properties, Maytas Infrastructure, Satyam BPO, Nipuna Services, Knowledge Dynamics, Nitor Global Solutions, CA Satyam ASP and Satyam Venture Engineering Services. Satyam has a wide network spread in 67 countries across 6 continents and employes 51,000 IT professionals across 11 countries including US, UK and Austrailia. It provides support to 654 companies globally including GE, GM, Nestlé and Us government, 185 of which are fortune 500 corporations. Satyam has strategic technology and marketing alliances with over 50 companies. The first crack in the company's reputation occurred during October 2008, when the World Bank fired Satyam and issued an eight-year ban against the company. The World Bank accused Satyam of installing spy systems on its computers and stealing assets from the World Bank. In addition, during an October conference call reporting earnings, one stock analyst drew attention to large cash balances in non-interest bearing bank accounts. The analyst expressed concern about the large balances and expressed reservations about the accuracy of the numbers. Investors ignored the analyst's comment and the stock price rose with the reports of positive earnings and revenue growth. In December 2008, the company attempted to aquire two infrastructure companies founded by family members of Mr. Raju for $ 1.6 billion, despite of concerns raised by independent board directors. This over stated deal eventually led to review by Government of India, a veiled criticism by the vice President of India and Satyam’s clients re-evaluating their relationship with the company. On December 30, analysts with Forrester Research advised clients to stop doing business with Satyam because of the fear of widespread fraud. Satyam hired Merrill Lynch to advise it on ways to increase shareholder value. By January 5, 2009, rumors circulated about several potential mergers between Satyam and competitors. On January 7, just hours before Mr. Raju disclosed the fraud, Merrill Lynch sent a letter to the stock exchange indicating that it was withdrawing from its engagement with Satyam because during the course of its representation it learned of material accounting irregularities. The Board called an emergency meeting for January 10 to address the company's rapidly deteriorating reputation....
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This note was uploaded on 12/11/2010 for the course MBA 561 taught by Professor Armour during the Spring '10 term at Aligarh Muslim University.

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Accountancy Fraud of Satyam, India - Fundamentals of...

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