Mr Sleaze & Co.

There is a sinister attempt to save the skin of the Satyam fraud kingpin by vested interests in the corporate and political establishment

Sanjay Kapoor

IN SOME WAYS Satyam's promoter Ramalinga Raju's decision to own up malfeasance in running his company is seriously surprising. And there is a reason. After failing to convince the Satyam board to buy out the infrastructural companies  of his sons, Maytas Infra and Maytas Properties for $1.2 billion, Raju would not  have given himself up and owned up his monumental fraud if he had not been assured of protection as well as the promise to retain his considerable fortunes.

If the past conduct of the Centre and state government is anything to go by, they  would not have allowed the blow out of Satyam as it has the potential to take down  with itself not only colossal funds of the politicians and other high net individuals  (HNIs), but also the country's glittering image as the investment destination for all  those who believed in the exotic India story.

This does not mean that the government did not know the machinations of some IT companies and how they were making money. But they just did not want to do anything that looked like shooting oneself on the foot. The big question is: can the government allow the fudging of accounts, fraud and other accounting manipulations to build a particular sector? Foreign funds were in reality lured into IT due to inflated valuation by multi-national banks and accounting firms like Pricewaterhouse Coopers (PWC). This differently layered reality prevents us to completely comprehend who benefits by how much in constructing this complex Potemkin. It is an enterprise that facilitates, besides promoters and bureaucrats, members of the political class to first, park their funds, and later, multiply it to fund their elections, which are becoming increasingly expensive.

Government agencies like the Income Tax Department (ITD) know about what the big IT companies have been up to. The ITD has owned up that they knew about Satyam's jugglery. Hardnews reported in its August 2006 issue in an article titled, ‘Big Boys Rule OK', about another big IT company (not Satyam) that had been showing increased business to improve valuations in order to beef up its stock prices. This is what we wrote in 2006 about a case that dates back to 2001:

"Hucksters have used the IT and dotcom revolution to rig the stock market. The high valuations of many so-called blue chip companies were found to be extremely shaky.  Even the software export that leavened their valuation was found to be spurious. When  income-tax authorities busted a Delhi-based software company that was doing business  with a blue chip IT company, they found to their horror that there were no computers  in the offi ce premises. The ones that were there were still packed. The son of the software company owner told one investigator, ‘My father does not even know what  a mouse of a computer is, let alone the meaning of software.' Shell-shocked investigators realised that this Delhi-based company had already transacted business worth Rs 500 crore with the blue chip company. It was only later that they discovered  no business had been transacted; only money had been rolled over to improve valuation. When the tax offi cials took up the matter with finance ministry officials,  they were told to keep quiet as it could hurt India's image as an IT destination. It is  disturbing to realise that many of the IT gurus whose success is being celebrated have dark secrets. These companies have been parking bays for all kinds of illegitimate  monies from politicians and peddlers."

Eerily, this case sounds similar to what Satyam has owned up: fudging of accounts, dubious receivables or business from non-existent companies, and monetisation of  high value shares of the stock market. And this is not Satyam. It is some other  company- very respectable!

SATYAM, TILL THE slowdown took place, was awash with easy money. Feted by the political class, Raju had people like former chief minister Chandra Babu Naidu swearing by him. Raju was asked to speak in front of US President Bill Clinton then     he visited Hyderabad some years ago. Raju, later, endeared himself to Congress Chief Minister Y Rajshekhar Reddy. Working in close cooperation with him, he went back to his first love - real estate.

He renamed an old 22-year-old company into Maytas Infra and began prestigious projects. He first got projects in the irrigation sector and subsequently got contracts to build the port and Hyderabad metro project. Through his unlisted company, Maytas Properties, Raju and his son, picked up substantial land in and around Hyderabad. Maytas Infra, that beat the bids of Anil Ambani's company, Essar, to win the Hyderabad metro contract, was hoping to use the growing appreciation of its land bank to pay-off the Andhra Pradesh (AP) government in the next 30 years. The other two bidders were asking for government investment to build this project. Delhi Metro chief E Sreedharan had called the grant of the project to Maytas a scam.

At that time, the AP government had threatened him with a defamation suit. Maytas sources claim that Sreedharan was a consultant to the project and it was surprising that he chose to object to it. They allege that the bidders that had lost out in the race were trying to bag the metro project due to the controversy. They also referred to the manner in which Anil Ambani's company had been awarded the  ultra mega power plant after Lanco - another Hyderabad-based company --- the  original winner of the bid, was found to be inadequate. What is really worth watching is whether the Satyam chief and his patrons in AP government and the centre manage to hang on to the Hyderabad metro project.

The state CID claims that Raju siphoned off Rs 7,000 crore from his accounts. He resorted to printing counterfeit fi xed deposits of various banks and rigging muster rolls - less people were employed then stated. Just 40,000 compared to 53,000. This helped him to siphon out their salaries through bogus accounts. He resorted to routing his dubious funds through Mauritius, into his real estate. He would have got away with this fraud if the valuation of the real estate had not come down due to economic slowdown. If he had pulled off the take-over of Maytas Infra and Properties by Satyam then there would have been no scandal.

After all, PricewaterhouseCoopers(PWC), their auditors, would never have blown  the whistle on Raju's shenanigans. Quite obviously, they were in cahoots.  "Otherwise what was the reason that DSP Merrill Lynch discovered Raju's fraud in three days and PWC could not do it in 7 years," says a senior bureaucrat to Hardnews. In his reckoning, Merrill Lynch, which was going through the books before it chose to take over the company, reportedly discovered a discrepancy in the output per employee - which seemed fake. Closer enquiry revealed that Satyam was a house of cards with many jokers.

Now, uncannily, there is a clear attempt to help Satyam. Ideally, the company should have been allowed to go bust, but the government, extraordinarily, appointed directors in its board, many of whom have a conflict of interest. HDFC Chairman Deepak Parikh has exposure in Satyam through IL&FS. Kiran Karnik was a director in EMRI - another Satyam entity. Also, the Satyam boss has not been allowed to be interrogated by SEBI and the local courts. Clearly, Raju has  been kept in a jail of his choice so that he comes to no harm - till the state government's and corporate interests are adequately taken care off