Satyam

Tim O’Sullivan

July 13, 2014

The Truth About Satyam

“Satyam” in Sanskrit translates into the word “truth.” However as we will learn, Satyam Computer Services stood for anything but the truth. Unethical behavior because of greed and pressure turned one of the world’s largest companies of IT into India’s version of Enron.

Ramalinga Raju was the chairman as well as founded Satyam in 1987. As the leader of the company he was under immense pressure to succeed. Mr. Raju was motivated by money, success, and the desire for power in the IT industry. These motivations led to fraud in the form of accounting breaches that vastly misstated Satyams balance sheet and income statement. The breaches took place in order to keep the stock price high to sell at inflated levels, as well as to raise compensation levels for executives like Mr. Raju himself. In order to do this Mr. Raju falsified accounts from his very own personal computer to strengthen the financial statements by including items that they did not really exist.

By creating these falsified bank accounts among other breaches he was committing, Mr. Raju was creating a gap on the balance sheet. The actual number of assets that Satyam actually had control of was vastly different then the actual number of assets that they were reporting on their financial statements. The longer he continued to do this, the larger the number grew between the actual balances of items like cash, accrued interest and revenues, and the number the company was reporting. For example, on the 2008 financial statements Satyam reported $5,361,000 in cash. If they had reported the actual number it would have been $321,000. Not only were assets vastly overstated by large percentages, liabilities was greatly understated. They claimed $0 in understated liabilities in 2008, but the actual figure was $1,230,000.

Due to this gap on the balance sheet and income statements spinning out of control Mr. Raju knew he was in trouble and had...