Satyam boss created complex network to divert cash: minister

NEW DELHI (AFP) — Satyam founder B. Ramalinga Raju created a 300-strong network of companies to divert funds from the fraud-hit Indian outsourcing giant, an government minister said Wednesday.

The corporate affairs minister’s comment came as a court in the southern city of Hyderbad threw out bail applications by Raju, his brother and former managing director Rama Raju and former chief financial officer Vadlamani Srinivas.

“It was a very complex process he (B. Ramalinga Raju) had adopted,” Corporate Affairs Minister Prem Chanda Gupta told Indian television network CNN-IBN in an interview.

“Our information is that there was a network of almost 300 companies and funds were diverted from one company to (another) and then to (a) third.”

He said the government believes other people were involved in India’s biggest fraud, which has been a bombshell for corporate India.

“But if you go into the systematic inspection and investigation of the structure of the company, you come to the conclusion that the whole thing (revolves) around the Raju family,” Gupta said.

B. Ramalinga Raju was arrested earlier this month, days after declaring he had falsified a bank balance of over one billion dollars for India’s fourth-largest software services exporter and inflated its profits.

Meanwhile, Satyam shares jumped 17.6 percent or 8.3 rupees to 55.45 rupees Wednesday after the company said it had named investment bankers Goldman Sachs and Avendus Capital to identify strategic investors and a potential buyer.

Satyam’s shares have risen nearly 100 percent in the past week from 27.75 rupees as bid talk has swirled and new government-appointed board members have sounded positive about funding plans to secure the company’s future.

Talk of a bid has mainly focused on Larsen and Toubro Ltd., India’s biggest engineering company, which last week tripled its stake in Satyam to 12 percent, and has said it may raise its holding to 15 percent.

Such a move under Indian law would oblige the company to make an open offer for a further 20 percent of Hyderabad-based Satyam.

The acquisition of Satyam could vault Larsen and Toubro, which runs a fledgling software business through its subsidiary L and T Infotech, into the big leagues of the flagship Indian IT industry.

Satyam operates in nearly 70 countries and has a blue-chip client list that includes 185 Fortune 500 companies.

In the immediate aftermath of the scandal, Satyam shares lost close to 90 percent of their value.

Meanwhile, the government is seeking to make all former top executives, board members and auditors of Satyam potentially “answerable” for failing in the “proper discharge of their fiduciary duties” and stop them leaving the country, the Press Trust of India reported.

“Affairs of the company were carried on with intent to defraud” by company bosses as well as with “an attempt to enrich themselves unjustifiably,” the government said in a petition to the Company Law Board.

The petition was submitted last week but only made public Wednesday, the news agency said.

The board is a quasi-judicial body with powers to rule on complaints involving companies.

Some former top officials were “either fleeing the country or beyond reach in order to evade or stall the investigation,” the government added.

The government has named a six-member board containing some of India’s most respected business figures to sort out Satyam’s affairs.