Sh. J. L. Negi
GM/RBI/CBI
jlnegi@rbi.org.in
gmrbi@cbi.gov.in






Satyam Company Services Ltd. was incorporated
on June 24, 1987
Promoters holding of the shares in 1992 was
18.78%
Main business of the company was IT related
fields and it came into prominence after Y2K
problem
In 1991, it was in a rented house having 10
Engineers.
Company was listed in Bombay Stock Exchange in
1992
company bags its first fortune 500 client John
Deere & Co
Formed the joint venture with Dun & Bradstreet
for IT services
 Listing in NASDAQ, USA- 1999
 Listed on New York Stock Exchange- 2001
 Revenue crossed $1 Billion-2006
 Ramalinga Raju got the Ernst & Young
Entrepreneur of the Year Award -2007


Revenue crossed $2 Billion -2008
B. Ramalinga Raju – Born on 16.09.1954 at
Garagaparru village of Andhra Pradesh. He got
commerce degree from Loyola College and
headed to Ohio University, USA for MBA , Vice
Chairman, NASSCOM, Chairman of IT Committee
in FICCI, Awarded Corporate Citizen of the Year
Award-2002, IT Man of the Year Award-2001 and
he was the Chairman of the company
 B. Rama Raju – He was the Co-founder and MD
of the company. He did a MA(Eco.) from Loyola
College, Chennai and MBA from Loredo State
University Texas, USA and he is the younger
brother of Ramalinga Raju

 V.
P. Rama Rao- He was an IAS officer and he
was a member of Satyam’s Board from July 1991
 Mrs.
Mangalam Srinivasan- She was a member of
the Board since July 1991. A senior fellow at
Havard University. Expert in International
Financial Management.
 Vinod K. Dham- He was on the Board from
2003.Inventor of Pentium chip
 Krishna G. Palepu- He was a member of
Board
from January, 2003, Professor of
Business Administration at Harvard School
and expert in Corporate Governance




M. Mohan Rao- He was dean of Indian Business School,
Hyderabad and expert in Corporate Finance and Financial
Derivatives. He was appointed to the Board on July, 2005
Ram Mynampati – He was inducted on the Board as whole
time Director in August, 2006. He was in- charge of half of
the Sales Portfolio of the company
V. S. Raju- He was appointed as Directors in April 2007 .
He was Chairman of DRDO and Director of the IIT, Delhi
T.R. Prasad- He was appointed as member of the Board in
April 2007 and was the ex. Cabinet Secretary,
Government of India


The case was initially registered by CB-CID, Andhra Pradesh
on January 9, 2009 on a complaint received from Smt.
Leela Mangat, a retd. employee of Syndicate Bank stating
that she had invested her retirement benefits for purchase
of the shares of the company on seeing the performance
of the company. She purchased 100 shares for a sum of
Rs. 19000. She filed the complaint after the confessional
letter of the chairman made public
The case was handed over to CBI on February 16, 2009 by
Government of India under section 5 of DSPE Act and
notification under 6 of DSPE Act by the Government of
Andhra Pradesh. ACB Hyderabad re-registered the case and
investigation was started
 The
confession letter by B. Ramalinga
Raju was submitted to SEBI/BSE and to
the Board of Directors on January 7, 2009
which stated that balance sheet as on
30.09.2008, cash and bank balance,
interest accrued on fixed deposits,
debtors were overstated and liabilities
were understated Company inflated
operating profit. The gap in balance sheet
was on account of inflated profits shown
over a period
 Whistle
Blower
E-mail dated 18.12.2008 from Joe Abraham to
Mr. Krishna G. Palepu and subsequently
circulated to other Board Members wherein
misdeed of the chairman/company was
narrated
Subsequently, Hemant Kothari, Non Executive
Chairman of DSP, Marril lynch Ltd. after
having discussion with B. Ramalinga Raju
forced him to confess as during the
discussion it was revealed that there was a
big hole in the balance sheet.
The brief discretion:
 Inflated non-existent cash – Rs. 5040 crore
 Accrued interest – Rs. 376 crore
 Understand liability- Rs. 1230 crore
 Over stated debtors position - Rs. 490 crore
 Operative margin 24% as against actual of 3%
 Every attempt made to eliminate the gap failed. It was
like riding a Tiger, not knowing how to get off without
being eaten
 Aborted MAYTAS acquisition deal was the last attempt to
fill the fictitious assets with real ones
 Neither he nor the MD took any money from the company
 Board of Directors were not aware of the fraud
Management Information systems
 Manpower Management
 Sales
 Cash and bank balances
 Selling of shares
 Role of Statutory Auditors
 Role of Internal Auditors
 Board of Directors
 Purchase of land
 Floatation of 327 companies
 Acquisitions
 Income Tax Liability







There were always excess man power to the extent of
10000
Recruitment was done not in tune with actual sales
Promoters published loading factor which was highly
inflated
Average loading factor off-shore was 62.02 published was
74.88, on-site 94.86 published was 96.76
More then ¾ of the expenses of the company was on
manpower
There was concept of distributed leadership and control of
expenses on manpower was found to be lax








Actual figures not known to business heads
MIS was filtered by the management
No linkage between actual sales with investor link figures
Publishing inflated sales in investor link
Monthly reviews were done on stand alone basis
None of the business leader tried to match the differences
between sales in investor’s link and actual sales
Targets of the business heads were fixed on stand alone
basis
Oracle Financial system was not used for generation and
analyzing the MIS
There were two methods of generating invoices in the
company
Regular Application Flow – The billing advice raised in
PBMS was ported to IMS in the form of partial/consolidated
bill and then the invoice was raised by the invoice team in
IMS. There was a real time and online connection
between PBMS and IMS. This was the procedure that is to
be adopted for generation of invoices from the date of
installation of IMS i.e. April, 2003. If the invoice was
generated through this application , the same would have
accessible and viewed by the Project Managers, Business
Circles, Quality Control Managers, FICs


Excel Porting – This was an option which existed in the IMS
application to port partial/consolidated bills through the
procedure called Excel Porting. This option was put in
place to meet the emergency requirements to raise
invoices bypassing the regular application flow
 OPTIMA
-Operational Real Time
Management
 SPR- Satyam Project Repository
 ONTIME- Calculation of efforts put in
 PBMS – Project Billing Management System
 IMS- Invoice Management System
 SHINE- Satyam Human Resource Information
Network
SPR
OPTIMA
SHINE
ONTIME
PBMS
IMS
Excel
Porting
OF
 Excel
Porting facility was provided for
bypassing the regular flow of invoices
generation for emergency case
 However,
this facility was misused
extensively.
The invoices inserted
through excel porting did not contain any
trail up to PBMS
Normal course, whenever a Purchase Order
is placed by a customer, the concerned
Business Relation Manager sends the details
through the FIC of a business circle to
OPTIMA and the same is sent to Satyam
Projects Repository (SPR), where the FICs
and the Associate In-charges of the Circles
approve the project and after approval a
unique serial number called the Project ID
gets generated in Satyam Project Repository
(SPR). Then, details regarding associates are
provided by another application called
‘SHINE’

OPTIMA forwards the details to ONTIME
wherein the man-hours required is calculated
and the billing on the customer gets decided.
From there, it moves to next application
PBMS. In PBMS, a bill is generated with
unique serial number and details of the
associates, their efforts in terms of manhours, amount per hour against each
associate, total number of such associates
along with the period and finally, a bill is
raised in PBMS

Then, this bill is exported to IMS and the
same gets consolidated in IMS and the
Consolidated Bill is generated with a unique
serial number. Based on this Consolidated
Bill, a final invoice is generated to be sent to
the customer. The invoice contains details of
total amount, name of the customer, project
ID, project name, Purchase Order, etc. Then
these invoices are ported to the Oracle
Financials and as and when payments are
received, they get adjusted and if the
payments are outstanding, then the same are
shown as debtors
 IMS
application played the various roles like
Admin Role, superior user role, FIC role. The
Admin role was having absolute rights. IMS
application was having superior user role and
with this invoices can be hide and unhide.
The hidden invoices is not visible to all
except few users who have superior user
role. The invoices were divided into two
parts ‘H’ & ‘S’, ‘H’ stands for hide and ‘S’
stands for show. But the fictitious invoices
were generated under ‘S’ by swapping the
role of ‘H’ & ‘S’. This facility was
incorporated at the instance of G.
Ramakrishna who was a process owner








There were two methods by which fictitious sales were
shown
1. Invoices generated through Excel porting
2. Actual development of the products
Period from 01.04.2003 to 31.12.2008, 7561 invoices were
found to be fake. All these invoices were directly inserted
in IMS through EXCEL porting.
The value of the false invoices was Rs. 5118 crore
It had fraudulently entered 6,631 false invoices into the
receivables module of Oracle Finance amounting to
Rs.4,766.20 crore
These invoices were having the status of S which actual
means should be visible but they got it changed to hide
The false invoices were generated with the help of Super
User facility
 Particular
set of people used to generate the
fictitious invoices during the odd hours
towards the end of the month/quarter
 The fictitious invoices were not visible to all
 Possibility of viewing these invoices by the
Key persons chose not to assess through OF
 Key persons were aware of invoices
generated without purchase order







Actual development of the products
Execution of projects in the name of non –existing 7
customers i.e, Mobitel, Cellnet, E –care, Synony, Northsea,
Autotech and Hargreaves
M D asked the business heads to develop the products
stating that customers will be introduced subsequently
Without the purchase orders, products were developed and
revenue was recognized. Products after development is
still with the company
Fictitious mails were generated as if it originated from
these customers
The domain was created in rediffmail and mails were sent
63 invoices were raised having value Rs. 430.66 crore
The company had booked Rs. 31.18 crore
as exchange profit on account of fictitious
sales during the fraud period







All the directors were sponsored by B. Ramalinga Raju
The Audit Committee members were not serious in
analyzing the financial position of the company
The directors were failed to perform their duties
The Directors got hand-sum remuneration, stock options
at Rs. 2 against the market price of Rs. 500. The directors
acted as a rubber stamp and not even in a single dissent
note was recorded
Meetings were conducted in perfunctory manner
In the meetings the promoters were always present to
influence the decision
There was not open discussions







6000 acres of land purchased by 327 front companies
Promoters also purchased land and flats
Land ceiling act was circumvented by floating the companies
Proceed of sale of shares and receipt of the dividends were used
for purchase of the land
Lands were purchased in the names of the close relatives also
Majority of land was agricultural land
Land purchased were spread over AP. TN, Bangalore and Nagpur
Number of properties acquired between 10.4.1999
to 30.06.2005 was 425 having 1224.77 acres and
between 1.07.2005 to 31.12.2008 were 444
properties having 4523.3 acres . The consolidated
number of properties acquired during this period was
935 having 5757.30 acres of Rs. 3454.91 crore.
 On
the basis of charge sheet, Directorate of
Enforcement has started attachment of the
properties purchased out the proceed of
crime under Prevention of money laundering
act, 2002 of the properties acquired w.e.f
2005. The properties acquired from the date
of the crime to 2005 mapping of the
properties are going on to attach the
properties under Criminal Law (amendment)
Ordinance , 1944. 100 properties having
value of Rs. 3.00 crore has been mapped

The company had availed short term loans and advances
from Banks and Institutions during the period between
2000 and 2008 on the basis of false and fabricated board
resolutions and majority of the loans were not shown in
the books. They have taken loans from the HDFC, HSBC,
Citi Bank, BNP Paribas, ICICI Bank, Fincity/Higrace and
Elem Investments Pvt. Ltd.
The company had paid interest of 37.62 crore
and availed 1493.84 crore loan from banks without
accounted in the books.
 Loan
taken from Banks and its companies
were not shown in the books. However,
equivalent amount was shown as amount
being transferred from the accounts
maintained at BOB New York. The fictitious
sales were reported as realized and shown
as deposited in the account of the company
maintained with BOB, New York










The auditor did not confirm the bank balances
independently
The various protocols were violated
Two set of Confirmation
No sample checking of invoices
Liability against tax not reported
Extra-ordinary payment of audit fee
Not verifying the accrue interest on fake FDs
Not verifying the TDS on accrued interest
Not doing end to end audit
Systems were found to be lax and same was not taken up
for rectification






The auditor did not do beginning to end transactions
verification
Cash and bank balances were not verified
Fake invoices were ignored
The matter was not reported to Audit Committee
The audit plans were prepared on the basis of the approval
of the promoters
Serious findings of the auditing team were ignored by the
audit team leader
The Auditors did not follow the minimum protocols. The
connection to OF was disconnected and it was not taken up for
connectivity. Mr. V.P.S. Gupta was given stock option and off-loaded
the shares and received Rs. 5.30 crore. The company switched to
process audit from the transaction base audit . However end to end
verification was not done even for sample selected on the basis of
random sampling. The auditors were more faithful to promoters
rather than to the company.
The companies were divided into three groups.
Group 1 owned by B. Ramalinga Raju and his family.
Group 2 owned by B. Suryanarayana Raju and his
family. Group 3 owned by B. Ramanraju and his family.
There were 12 addresses of 327 companies. The
relatives and loyal employees were Directors
in these companies. By these companies the promoters
had purchased land, layered funds, borrowed the
money against the share for Satyam.

The company had taken Rs. 1230 crore
loan from the front companies and these
were not shown in the books. The loan
amounts were used for payment of
salaries,
acquisition
and
payment
of
dividends. The amount of loan were
raised against the shares of the promoters



In India- Money was diverted to customers not having
dealings with them
In Overseas- The amounts were paid to the companies who
were not having dealings with the company and the
amounts were diverted to British Virgin Islands
An amount of USD 0.666 million was paid to Medbiquitous
on two occasions of USD 0.333 million each. The stock
worth USD 0.001 per share was purchased at a premium of
USD 1.00 which was almost thousand times more than
The face value.
The company has diverted Rs. 154.40 crore to
global networking solutions, Infotech solutions,
Alpha software and Tech. consultant Ltd. during 1999
to 2002 and was not accounted in the books. All
the companies were not having commercial deals with
the companies. Rs 390 crore out of the proceeds of
ADRs used for repayment of loans not reflected in
the books








Company tried to purchase MPL and MIL to fill the gap of
hole in the balance sheet
Valuation was not done properly
Amount arrived at was almost equivalent to the fictitious
amounts
Valuation was done even for the properties not owned by
MPL
The liabilities were not factored into
Due diligence report was not taken into accounts
Valuation was done for different purpose
Valuation was done on unsigned financial position of MPL

Out of the sources of funds of Rs. 10,961.03
crore, an amount of Rs. 8,842.54 crore (Sundry
debtors Rs. 2651.36 crore, cash and bank
balances Rs. 5312.62 crore and other current
assets Rs. 878.56 crore) were liquid assets which
could be immediately utilized for the purpose of
acquisition. Only after using the available
reserves and raising a loan of 25% of the
acquisition cost, the company was suppose to
acquire 51% of MIL and 100% of MPL by having
the minimum balance . The
company was
having only Rs. 2,944.50 crore (after removing
fake amount of Rs. 5899 crore )of liquid assets
and after considering the proposed borrowing of
Rs. 1979.52 crore there would still be a shortfall
of Rs. 2991.58 crore






Valuation of MPL was done by E&Y
Excess FSI taken
Some of the projects were only on paper
Valuation was done in one day
Valuation done not as per the guidelines prescribed by RBI
Equity value as on 30.9.2008 was assessed at Rs. 6525.30
crore
 The
cash and bank balances shown in
various banks in the form of current
account and Fixed Deposit ws Rs. 5160.34
crores for the period 2002 to 2008. While
actual balances was only 139.78 crore.
Thus, there was a difference of Rs.
5020.55 crore. The company was having
account with 36 banks in India and 7
banks overseas. The certificate shown to
the auditors did not carry details of Fixed
Deposit number

No actual physical Fixed Deposit existed ,
balance conformation letter did not tally the
amount actually maintained with banks, balance
did not contained account number, no mention
about signatories name and employment number
etc.
The company has shown accrued
Interest on fictitious FDRs.
The amount shown as on Sept., 2008
was Rs. 375.53 crore wherein actual
interest was only 7.42 lakh
 The
Satyam had gone for many
acquisitions like Citi soft Knowledge
dynamics, Nitor Global Solutions, Bridge
Strategy S & V Management consultant,
Nipuna and Medbiquitous services Ltd.
The Nipuna now Satyam BPO was acquired
by the company at very adverse
conditions. The shares of Olympus and
Intel who invested in Nipuna were
purchased by Satyam at high rate
The promoters were holding 2.18% of total
shares as on Dec., 2008 which was 18.78% in 1991
The shares were sold through various brokers and some
were benami transaction and amounts received by the
promoters was Rs. 767.73 crore.
The promoters in planned way sold the shares when
the price of the share was high. They resorted to inside
trading.
The promoters also borrowed the money from NBFCS
by pledging the shares of the company. The loans were
to the extent of Rs. 1951.46 crore were raised
against pledging of 100941592 shares.
 The
shares were unloaded through margin
calls .The un loading of the shares was
done at the instance of B. Ramalinga Raju
 The promoters and their families
wrongfully gain to the extent of Rs. 2743
crore (767 crore + 1951 crore+25.80 crore
dividend payment)
 V.Srinivas Rs. 32 crore
 G.Ramakrishan Rs. 11.27 crore
 D. Ventapathi Rs. 1.76 crore
The promoters received dividend to
the extent of Rs. 27.08 crore for the year
2007-08 and 2008-09 where the actual profit
after adjustment of fake revenue was Rs.
176.12 crore in 2007-08 and 269.16 crore
in 2008-09. They were not eligible to
get the dividend as per company law section 205.
37 companies out of 327 companies had given
advances to Satyam to the extent of Rs. 1425
crore between November 2006 to October 2008.
 194.60 crore was returned back to 15 companies
between October 2008 to December 2008
 Net amount of Rs. 1230 crore still outstanding
 The borrowing and returning was not reflected in
the books while out of the amount salary,
dividend and acquisitions have been made.

The quantum of law suffered by various
institutions and the investors was 14162.25 crore
on the basis of actual law suffered by various
institutional investors, loss suffered on account of
slide in share price was average price. As on
01/09/2009 price was Rs. 19.76 and average price
as on 16.12.2008 was Rs. 227.55.
The sales were inflated and in order to
get the benefit the tax paid overseas were
shown and deductions were obtained in India.
The tax assessment was made without
actual verification of the records
 Fake
TDS Rs. 60.84 crore
 Actual TDS Rs. 20 crore
 Actual interest Rs. 1 crore
 Fake interest Rs. 269.01 crore
 Fictitious sales were shown as off shore
exports
 Other income as a part of income of USA but
actually not included
 False claim in overseas tax payments Rs.
329.59 crore










B. Ramalinga Raju.
B. Ramaraju
V. Srinivas
Gopalakrishnan
T. Srinivas
B. Suryanarayana Raju
G. Ramakrishna
D. Venkatapathi Raju
Srisailam Chetkuru
VS P Gupta
 120-B
-Criminal conspiracy to commit an
offence
 409 -Criminal breach of trust
 420 -Cheating
 467 -Forgery of a valuable security
 468 -Forgery for the purpose of cheating
 471- Using as genuine a forged documents
which is known to be forged
 477 A- Falsification of accounts
 First
charge sheet was filed on April 7, 2009
 Supplementary charge sheet filed on
November 22, 2009
 Additional Charge sheet filed on January 7,
2010
 All charge sheet have been clubbed together
for faster trail
 The case is with Additional Chief
Metropolitan Magistrate which has been
approved by High Court of AP on 17 February
2010
Thanks