Cooked Book Disclosures

You call it greed, stupidity, ‘riding a tiger’, trying to control a company from falling into outsiders’ hands—but none is a good enough reason for the biggest fraud that corporate India has ever seen. As corporate leaders search for words to express their outrage, as India Inc and Nasscom mount an offensive to dissociate from the Satyam Saga, as shareholders sulk and cry, as employees search and pray, the most obvious of questions has still not been answered. Is it so easy to show Rs 5,000 crore of non-existent bank balances in balance sheets?

Most importantly, there are two more questions that need answers: Why did the disclosure come at this stage? Who benefits from them? To find an answer, we should tackle the second question first.

Consider a situation where the aborted Maytas acquisition costing SatyamRs 8,000 crore had happened. That would have meant the non-existent Rs 5,040 crore cash and bank balances, Rs 376 crore accrued interest and Rs 490 crore overstated debtors would have funded the transaction. That is Rs 5,906 crore being squared up. The balance Rs 2,100 crore would have paid up the 17 per cent public and institutional shareholders of Maytas Infra as well as the Rs 1,230 crore that the Raju family lent to Satyam. The Raju family would then release the pledged shares with the institutions and everything would be buried, forever. However, that was not to be. The valuation of Maytas was inflated—investors howled and scowled, and the Rajus retreated.

The current disclosure by Raju has nothing to do with guilt, a burdened heart or any such emotional surge. A person who has lied through his teeth for seven years does not really inspire belief today. These disclosures have a direct and material benefit to the family, including his sons who control Maytas and Rama Raju, Satyam’s MD, among others. Maytas Infra and Maytas Properties, which have physical assets, would now continue to be owned by the family. It would be left to Satyam to fill the gaping holes. By admitting to fraud, Raju has left Satyam shareholders and all of us to deal with the problems created by him while bestowing the two Maytas companies to his family.

There are many other questions that need answers:

• Should we believe that the bank balances never existed? Is it possible that money that was really there may have been swindled away in the past couple of years to fund the creation of Maytas Infra and Maytas Properties?
  
• Independent director M. Rammohan Rao, the dean of isb, chairs Satyam’s audit committee. How can he feign ignorance and get "stunned by the disclosures"?
  
• What is the consultancy/professional fee of almost Rs 3 crore that was paid to independent director Krishna Palepu over the last three years? What is the exact relationship between Palepu and the Rajus?
  
• Raju knew about the impending disclosures. The trustees of the pledged shares sold them on a written request from the ‘borrowers’ and lenders. Isn’t that insider trading?
  
• Maytas Infra shareholding suggests that the promoters own only 36 per cent in the company. However, the list of public shareholding in that company includes B. Rama Raju, B. Jhansi Rani, B. Suryanarayana Raju and Radha Raju Byrraju. Would the correct promoter group shareholding in Maytas Infra be actually 56 per cent?
  
• Who owns Elem Investments, Fincity Investments and Highgrace Investments, that together control almost 27 per cent of Maytas Infra?
  
• Who valued the Maytas Properties’ land bank? All the Big 4 accountancy firms have denied valuing the land bank.
  
• With the benefit of hindsight, isn’t it true that the botched acquisition attempt of Maytas Infra would have benefited Satyam shareholders? Did the Satyam board then know about the real state of affairs at the company? Did they sanction the acquisition of Maytas to square up accounts and clean up the cooked books?