"Satyam" in India's ancient Sanskrit language means "truth," but the Mumbai-based company named Satyam Computer Services Ltd.'s balance sheet had numbers that were far from the truth, according to its chairman and founder Ramalinga Raju.
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Raju and his brother resigned Monday, admitting the company had inflated its cash and bank balances on its balance sheet by more than $1 billion. The Indian outsourcing company, with a work force of 53,000 that serves more than a third of the Fortune 500 companies, reportedly had been doctoring its numbers over the last three years.
Raju said the balance sheet as of Sept. 30 had inflated nonexisting cash and bank balances of 50.40 billion rupees ($1.04 billion), understated a liability of R12.3 billion and overstated debt of R4.9 billion.
While these revelations pale in comparison to fund manager Bernie Madoff's alleged $50 billion Ponzi scheme, investors and the global market are not happy. Chairman C.B. Bhave of the Securities and Exchange Board of India described Satyam's announcement as an
event of "horrifying magnitude," according to a published report.
The news sent shares of Satyam falling 77%, but the collateral damage will likely be large because foreign investors will probably be more cautious in investing in companies in the region as they question corporate governance. - Gerald Magpily
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