The Hindu Business Line : The obfuscation of satyam

The government has to act quickly to uncover the fraud and send Mr Raju and his accomplices to their logical destination: Jail. The country’s image is at stake and any attempt at a cover-up can be damaging. What we need is a real investigation of the case; not the kind of stuff we have been seeing in the last fortnight, says RAGHUVIR SRINIVASAN.

Is the news about inflation of employee rolls a red herring?

More than a fortnight after the sensational “confession” of Mr Ramalinga Raju about his shenanigans at Satyam Computer, we are none the wiser on the fraud. There are more questions than answers and with every passing day, the list of questions is only growing longer. That this is the case despite Mr Raju being in custody and after five full days of interrogation by the police, is surprising indeed.

Only two things are clear at this point in time. First, that the Satyam scandal is much more than just what Mr Raju “confessed” to as accounting manipulation. It is a massive fraud that, like an onion, appears to have several layers, and Mr Raju is clearly not the only person involved. The scale and extent of the fraud appears to go much beyond Satyam and may even extend to the political class.

The second is that a massive exercise in obfuscation of the facts of the case appears to be on. Selective ‘facts’ of the fraud are being either spelt out in Court or leaked out deliberately. The information is coming out in dribbles, building up a mystique. Importantly, it is also sending people on a leather hunt in search of the precise nature of the fraud.

Inflating muster rolls

Take the latest ‘fact’ that has been revealed on inflation in the employee count of Satyam. The police counsel told the Court on Thursday that the actual employee headcount was lower by as much as 13,000 compared to the 53,000 employees that the company disclosed as late as September last. Mr Raju is said to have siphoned off Rs 20 crore a month from Satyam through salaries for these ghost employees.

Really? How did Mr Raju manage the feat? With banks strictly following KYC norms, how could he open 13,000 ghost accounts which would have required as many signatures, addresses, proof of such addresses and IT PAN numbers? Mr Raju must be a master forger if he managed to forge the required documents. More important, he must have had an entire back-office devoted to just managing these ghost accounts!

Inflating muster rolls to spirit out company funds is, of course, a time-tested strategy in proprietary concerns where the owner takes out cash without paying taxes. But Satyam is no mom-and-pop corner shop. It is a full-fledged corporate entity with professionals manning its HR and finance functions.

Besides, it has enterprise resource planning (ERP) in place and it is not possible to perpetrate such frauds without connivance of several people. So, are there others who were hand-in-glove with Mr Raju in his nefarious activities? Assuming there were, it is impossible to imagine how so many people could keep such a major secret to themselves for so many years.

Red herrings

Impossible, you say? Precisely, that’s the point. So, is the stuff about inflation of employee rolls a red herring designed to send investigators, regulators and the media on a leather hunt? In fact, there are reasons to suspect that the “confession” itself is one big red herring designed to divert focus from the main issue of defalcation of Satyam’s cash.

That there has been an illegal, unfair draining of cash from Satyam by Mr Raju is now certain. What is not though is how he managed the feat, how long has been doing it, how much he has drained out and who his accomplices are in the fraud, both within the company and outside. These questions will be followed by the big one on where he has invested the ill-begotten wealth. Here again, there are reports of benami land deals across Andhra Pradesh but, again, these could also be red herrings.

The logical question is: Why are so many diversions being created and who is doing this? Are there powerful interests that could be hurt if the real truth, satyam, comes out? Does this scandal extend to the political class as many suspect? Is the entire exercise of taking Mr Raju into custody and his “interrogation” aimed at keeping regulators such as the SEBI and Serious Frauds Investigation Office (SFIO) away from him? If so, why?

Clearly, there are more uncomfortable questions than answers now. Maybe it is time to demand an independent investigation by a central authority vested with the sole responsibility of getting to the bottom of the fraud. How about an investigation by a crack team, comprising representatives from the Central Bureau of Investigation, the SFIO, SEBI and the Institute of Chartered Accountants of India?

Satyam needs the cocktail

Of course, this appears to be a strange cocktail of investigators. But Satyam needs such a cocktail because it is an accounting, civil, criminal and securities fraud, all rolled into one. It is only the combined expertise of all these bodies that can get to the bottom of the matter. The importance of getting to the bottom of this dreadful act cannot be over-emphasised for the stakes have increased significantly since the fraud first came to light.

The selective information trickling out on stuff such as employee headcount inflation has the potential to damage the entire outsourcing industry, nay, the image of the country itself. Overseas clients of other big outsourcing companies cannot be blamed if they raise questions on manpower and billable resources of their service providers.

The government has to act and act quickly to uncover the fraud in all its (in)glorious detail and send Mr Raju and his accomplices to their logical destination: Jail. The country’s image is at stake and any attempt at a cover-up can be damaging. What we need is a real investigation of the case; not the kind of stuff we have been seeing in the last fortnight.

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