Government moves to save Satyam, to appoint 10 new directors (Intro Roundup)January 9th, 2009 - 11:31 pm ICT by IANS
New Delhi/Hyderabad, Jan 9 (IANS) The central government Friday sacked Satyam Computers’ directors and announced it will appoint 10 new directors within seven days to run the company tottering on the brink of collapse after its founder B. Ramalinga Raju rocked corporate India by confessing to the country’s biggest financial fraud of Rs.70 billion (RS.7,000 crore).With this move Saturday’s meeting of the truncated board of the company stands cancelled. The board has shrunk from nine to five members after four independent members quit in the wake of Raju’s aborted bid Dec 16 to buy two cash-strapped firms, Maytas Properties and Maytas Infra, promoted by his two sons.
“The government wants to protect the interests of the employees (53,000) and other stakeholders,” Company Affairs Minister Prem Chandra Gupta told reporters in New Delhi.
He said the Company Law Board has agreed to the government’s proposal “to restrain Satyam board members to continue as members and appoint 10 new members”.
The government move was cheered by Satyam employees whose job was at stake as the company had funds to pay only the December 2008 and January 2009 salary which, according to the firm, comes to Rs.5 billion (Rs.500 crore) a month.
The minister’s announcement came within hours after market regulator Securities and Exchange Board of India summoned Raju to appear before it Saturday to depose on the massive fraud by him.
The announcement coincided with the crime branch of the Andhra Pradesh police beginning its own probe into the scam.
Gupta said in New Delhi that “the Company Law Board has already issued an order to the existing directors of the board restraining them from exercising their functions and the order becomes effective immediately.”
“The SEBI office at Hyderabad has already taken action which includes seizure of documents of the company and the ministry of corporate affairs has already sent a team of officers who are now inspecting Satyam’s eight group companies,” he said.
On issues of gross violation of corporate governance norms by the company, Gupta said: “The Satyam case in an aberration, the government is determined to take all possible actions under the law to bring to book all those persons who are responsible for betraying the faith of lakhs of shareholders, employees and customers within and outside the country.”
As the enormity of the scandal broke out, role of auditors of the company, PricewaterhouseCoopers (PwC) came under the scanner. “Action has already been initiated by the Institute of Charted Accountants of India (ICAI) against the auditors of the company,” added Gupta.
The 54-year-old Raju will appear before a SEBI team at Satyam’s corporate office at 4 p.m. Saturday, his lawyer S. Bharat Kumar said.
SEBI wanted Raju to depose Friday itself but the lawyer sought a day’s extension as the time was too short.
“The regulator has granted my client (Raju) 24 hours for deposing before its investigative team on our request. My client has been directed to appear for the hearing at Satyam corporate office at 4 p.m. Saturday,” Kumar told IANS here.
The lawyer met the SEBI team at the Satyam office Friday evening and informed it that Raju was not keeping well and the time given for deposition Friday was too short.
“I requested the regulator in writing for one-day extension, as the summons were served today (Friday) at 2.30 p.m. for the hearing at 4 p.m. As the summons were given at a short notice, it was difficult for my client to rush for the hearing as he has also not been keeping well,” Kumar said.
In the absence of Raju or his family at his residence in the upmarket Jubilee Hills neighbourhood, the summons were handed over to the security officer on behalf of the regulator.
The Satyam board had nine members - Raju, his brother B. Rama Raju, wholetime member Ram Mynampati and six independent directors. Four of the independent directors quit the board in the wake of aborted bid by Raju Dec 16 to make Satyam buy two firms, Maytas Properties and Maytas Infra.
With the resignation of Mangalam Srinivasan, Krishna Palepu, Vinod Dham (all three based in the US) and M. Rammohan Rao, the board now is left with Mynampati, T.R. Prasad, former cabinet secretary to the Indian government, and V.S. Raju.
The Satyam scrip was further mauled in Friday’s trading. At one point it was quoted at around Rs.6.
While the New York Stock Exchange had stopped trading in the scrip Wednesday, the day Raju stunned everyone by his admission of the massive fraud, the Bombay Stock Exchange (BSE) had taken it out of its key 30-scrip index, the Sensex.
There was speculation Friday that Ramalinga Raju might be arrested though the Andhra Pradesh police had said Thursday that they cannot do so merely on the basis of his confession that he had rigged figures to inflate the company’s profits.
There were also an unconfirmed report that Satyam’s chief financial officer Srinivas Vadlamani had attempted suicide, but the company denied it. Vadlamani’s name does not figure among the people Raju has mentioned in his resignation letter absolving them of any wrongdoing.
Vadlamani Thursday sent his resignation to the interim chief executive Mynampati, who said the resignation has not been accepted.
There were also reports circulating that the interim team has also sent a mail to the employees saying they would not be paid salary for two months. Mynampati told a press conference Thursday that the December salary is being paid and the company has funds to meet salary commitments for January.
Mynampati said the interim management was scouting for a strategic investor as the company was facing severe funds crunch. He said the option of outright sale of the company was not ruled out.
He also said about 100 clients who contribute 80 percent of the $2 billion revenue had assured they would stay with the company.