Sunday, May 25, 2014

M-Sat finds Satyam fraud began in 2002

The multi-thousand-crore-rupees accounting fraud at the erstwhile Satyam Computer Services Ltd by its ex- chairman B. Ramalinga Raju dated back to 2002, much further back than earlier thought.
Investigations carried out by Mahindra Satyam (M-Sat), which took over Satyam Computer Services Ltd in April, 2009, revealed this fact.
The investigating team noted that there were certain transactions which were either improperly recorded or remain unrecorded. There was no proper information about fictitious transactions to the tune of Rs 1,122 crore prior to 2002, as a result of which it was shown as net opening balance as on April 1, 2002. It was classified as " unexplained differences suspense account," in the assets and liabilities statement.
The fraud committed by Satyam's founder and ex- chairman B. Ramalinga Raju and his team was exposed in the restated audit report of M- Sat for the years 2008- 09 and 2009- 10, which was approved by the board of directors of the company on Wednesday.
An independent forensic team appointed by the new management had to struggle a lot to unearth the fraud. " It was the most challenging task. The forensic team had to do 100 types of investigations, go through 2,70,000 files running into 30 terabytes, decode the secret data gathered from 300 hard disks seized from the erstwhile promoters, study one billion lines of secret transactions and examine 200 bank accounts to dig out the scam," M- Sat chairman Vineet Nayyar said.
These include fictitious accounts in revenue receipts, interest income, exchange fluctuations, salary, other expenses, bank borrowings and interest, and tax payments. The total extent of fraudulent entries had an impact of Rs 6,800 crore on the profit and loss account of M- Sat.
For instance, the fictitious revenue from April, 2002, to September, 2008, was Rs 5,353 crore, generated by creating 7,500 inflated invoices and circumventing the normal revenue recognition cycle. This was followed by showing fictitious cash collections as collections from customers. In order to substantiate these fictitious collections, forged bank statements and fixed deposit ( FD) receipts were also prepared.
Of the total fictitious revenue shown, about Rs 4,870 crore was translated into fictitious cash and bank balances. Similarly, fictitious interest income recorded from 2002 to 2008 was Rs 899 crore, of which Rs 327 crore was translated into fictitious cash and another Rs 197 crore was recorded as withholding tax on such interest income.
The remaining Rs 375 crore was reflected as accrued interest as on September 30, 2008.
The forensic investigation also exposed the record of Rs 206 crore towards fictitious exchange gains, which resulted in fictitious debtors of Rs 18 crore and balances of Rs 188 crore. It revealed that Raju had knocked away Rs 293 crore as net salary costs, which were not recorded in the books of accounts, resulting in fictitious cash and bank balances of Rs 299 crore.
What is more, during the scam period, Raju and his team had borrowed Rs 720 crore from banks, but there are no loan records. The company had effected unrecorded repayments to the extent of Rs 581 crore. The unrecorded interest expenses in respect of such accounts amounting to Rs 17.5 crore also resulted in fictitious cash and bank balances.
"The promoters showed fictitious tax payments ( advance tax and US federal tax) to the tune of Rs 306 crore. We have also noticed some entries and debits which we are unable to explain as they remain unidentified," Nayyar said.
The investigation has been unable to identity the nature of certain alleged transactions amounting to Rs 1,203 crore against which the firm had received notices from 37 firms.
Srinivasa Rao 
Last Updated: October 4, 2010  | 17:47 IST

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