Raju admits to diverting Satyam money | business | Hindustan Times
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Raju admits to diverting Satyam money

CID sources said former Satyam chairman said funds were diverted during the past four to five years. This means Raju's Jan 7 statement that he inflated company accounts was a red herring.Special Coverage

business Updated: Jan 21, 2009 17:55 IST

Disgraced founder and former chairman of Satyam Computer Services B Ramalinga Raju has confessed that he diverted funds of the IT company to the two real estate firms promoted by his family, state police sources said in Hyderabad on Wednesday.

Raju, who was grilled on Wednesday for the fourth day by officials of Criminal Investigation Department (CID) of Andhra Pradesh police, also reportedly admitted using the Satyam money to buy prime land in and around Hyderabad.

CID sources said Raju told interrogators funds were diverted during the past four to five years. This means Raju's Jan 7 statement that he inflated company accounts was a red herring.

While resigning as company chairman, Raju had admitted to a Rs 70 billion (Rs 7,000 crore/$1.43 billion) accounting fraud, saying the company had cooked its books over several years resulting in inflated (non-existent) cash and bank balances.

He reiterated this during CID interrogation soon after his arrest Jan 9. But investigations have now revealed that a big chunk of this money existed but was diverted to other firms.

CID, which took Raju, his brother and former managing director B Rama Raju and former chief financial officer Vadlamani Srinivas in custody for four days following a court order, grilled the former Satyam boss on the basis of his confession.

After prolonged interrogation, Raju finally admitted to diverting Satyam funds to his family firms - Maytas Properties and Maytas Infra. He told CID sleuths that this was going on since 2004.

Raju not only diverted funds out of Satyam but is also believed to have misled company auditors PricewaterhouseCoopers (PwC) by submitting fake bank documents. CID and some regulatory agencies have already seized some documents from PwC.

Raju also reportedly swindled money through 6,000 fake salary accounts for last few years. Sources said he had created these accounts in four banks to divert the funds from fixed deposits. Some of these funds were flowed through his accounts in foreign banks.

The company's claims that it had 53,000 employees came under scrutiny after Raju's Jan 7 confession. The government-appointed board is also trying to ascertain these figures.

With Raju confessing to diversion of funds, the Serious Fraud Investigation Office (SFIO) and Registrar of Companies (RoC) are now trying to trace a Mauritius-based company used for channelising the money to Maytas.

The central government has already asked SFIO to extend the ambit of investigations of Satyam fraud to cover both Maytas Properties and Maytas Infra. A team of SFIO is checking the accounts and records of the two firms.

However, both the firms have denied that they received any funds from Satyam.