SATYAM COMPUTER SERVICES SCANDAL - Term Paper Example

This scandal had a negative implication in overall global information technology industry during the trying times of credit crunch as the company used to provide its services to more than 75% of the Fortune 500 companies (Timmons & Wassener, 2009). It was on January 2009, the Chairman of the company, Mr. B. Ramalinga Raju mailed a letter to the Securities & Exchange Board of India (SEBI) as well as his Board Members confessing the fact that he had been forging the financial statements of the company.

This resulted to the overstatement of the company revenues by $ 1 billion. He further mentioned that the balance sheet of the company incurred a liability of $253 million which was arranged by him personally. The revenues were overstated by 76% as well as profits by 97%. Therefore, the major offenders in the event were the Former Chairman Mr. B.Ramalinga Raju along with other several members of the board (Kripalani, 2009). Loss to Satyam During the period of such issues, the company lost its significant clients.

It was noticed that immediately after the Satyam Computers was caught in fraud, the company was sold to Tech Mahindra which is based in Pune and deals with telecom-solution providers. He was successful at winning the auctions at $352 millions and bought 31% of Satyam. In order to acquire more of 20% of the Satyam shares Tech Mahindra made a public offer (Singh, 2009). The case was referred to be India’s Enron. Most of the financial houses across the world were disappointed by the fact that the biggest fraud in India was unnoticed by the authorities for quite long.

This event resulted to be quite harmful in affecting the economy which if noticed in time could have been prevented. The event raised questions in relation to the level of corporate governance in India and has ruined the reputation of the Indian telecom industry among the overseas companies. The investors demonstrated their concern regarding the event and stated that the event took place at worst possible time. It was the time when market had begun recovering and the event made the market even worse (Vaswani, 2009). Mr. Raju had been trying to conceal the losses from the investors and as a result was caught up in the ferocious cycle of falsehood and debts.

He stated that $1 billion of the cash in hand with company did not exist actually. However, according to various analysts Mr. Ramalinga Raju had been maneuvering the cash flows because of which the falsehood was not getting detected. It was also analyzed that the reason for such fudging of accounts at Satyam by Mr. Ramalinga Raju might have been for the chase for higher profits and the wish to keep pace with the growth rate of the outsourcing industry (Vaswani, 2009). Investigation on the Matter Soon after the event took place, the financial regulators started their invigilation on the matter.

Bombay Stock Exchange, where it was listed had decided to remove Satyam Computers from its indices (Vaswani, 2009). Mr. Ramalinga Raju was soon detained and put behind the bars for such scandal (McDougall, 2010). Reasons for Such Activities to Matter These kind of fraudulent activities not only hamper the existence of the organization but also affect the economic