India Outsourcer Satyam Implodes as Fraud Disclosed
B. Ramaling Raju, chairman of Satyam, handed in his resignation after admitting to the financial fraud and said the company's board of directors was not part of his deceit. Ram Mynamipati will take over as interim chief executive.
Raju said he had to come clean and tell the truth, which is what Satyam translates to in Sankrit.
"Every attempt made to eliminate the gap failed," Raju wrote in a letter released by the Bombay Stock Exchange. "As the promoters held a small percentage of equity, the concern was that poor performance would result in a takeover, thereby exposing the gap. It was like riding a tiger, not knowing how to get off without being eaten."
The surprise revelation about the company listed on the New York Stock Exchange and BSE sent shock waves through the IT community. Forrester Research had recently released a report on Satyam's success in organically growing the business, and Ernst & Young last year gave Raju its Entrepreneur of the Year award.
Melissa Baratta, a spokesperson for Satyam, said the company cannot speak about anything other than what it has said publicly, but added that the company is preparing a press conference for Thursday, where additional details will be disclosed.
Demand for Answers
The National Association of Software and Services Companies in New Delhi was shocked by Raju's disclosure. "While the law will take its course, this incident is particularly unfortunate as the Indian IT-BPO industry had set very high standards of ethics and corporate governance," NASSCOM said. "This is a stand-alone case of failure of corporate governance, and it is critical that it be viewed in this light."
NASSCOM added...