Satyam scam: fake invoices, overpaid auditors

22 April 2009

Meanwhile, the chargesheet filed by the Central Bureau of Investigation in a Hyderabad court seeks to show how managers at the outsourcing major spun an elaborate web of fraud to attract customers and investors, while using their stakes in the company to raise cash for themselves.

The deception played out over at least eight years, involved dual accounting books, more than 7,000 forged invoices, dozens of fake bank statements, and thousands of unnecessary employees and auditors who received fees several times the market rate, according to the CBI.

Its 77-page chargesheet details the scope of the fraud at Satyam, and lays out the bureau's case for charging six company managers, their Price Waterhouse auditors and an adviser with cheating, forgery and falsification of accounts.

Satyam managers, including the founding brothers B Ramalinga and B Rama Raju, ''were able to attract prospective customers and investors by making them believe that the company was carrying out huge volumes of business,'' the report said.

The details of the bureau's investigation could bolster a string of class-action suits pending against Satyam managers and auditors.

The Raju family and their friends, which held 19 per cent of Satyam when it went public in 1992, ''made hay when the sun was shining'' by selling shares as they carried out the fraud, the bureau said in its report. More than 300 investment companies were started, some of which used loans backed by shares to invest in real estate and agriculture. Banks issuing the loans included Deutsche Investments India, GE Capital Services and DSP Merrill Lynch.