It would be too simplistic to believe that the financial fraud that has taken place in Satyam was essentially a consequence of the greed and venality of a few, namely, B. Ramalinga Raju and his associates — sorry, that should read cohorts. As more details about the scandal surface, it is clear that Raju could not have done what he did without the direct or tacit support, active connivance or passive negligence of:
* Pliant partners of Pricewaterhouse.
* So-called independent directors who were blissfully unaware of the goings-on in what was India’s fourth largest information technology company.
* A market regulator (the Securities and Exchange Board of India) that dragged its feet.
* A government department (Ministry of Corporate Affairs) that was virtually sleeping on the job and, above all.
* A bunch of influential politicians who provided the unscrupulous prompter pelf and patronage, presumably in return for unknown favours.
The Satyam scandal has revealed the ugly underbelly of Indian capitalism in ways that have taken many by surprise. Like the share-market scams masterminded by Harshad Mehta (1992) and Ketan Parekh (2001), this fraud goes far beyond personal malfeasance and represents systemic failures of official oversight mechanisms and processes that are supposed to be in place to ensure good corporate governance.
That Raju could even have conceived of investing $1.6 billion that was supposed to belong to his flagship firm — funds that
we now know never existed — in two real estate companies (Maytas Infra and Maytas Properties) controlled by his sons was bad enough as an example of crude corporate cronyism. The fact that Sebi and the MCA waited for more than two weeks for the scam to come out into the open, that is, after Raju chose to ‘confess’, indicates the laxity of systems that are meant to protect the interests of small investors over and above the company’s 53,000 employees.
Former Economic Affairs Secretary in the Ministry of Finance E.A.S. Sarma had written a series of letters in recent weeks to government authorities in Delhi, Mumbai and Hyderabad almost anticipating that a fraud of such magnitude would break out. He alleged that the two Maytas companies “seem to have the blessings of senior ruling political leaders of Andhra Pradesh who have bypassed all competitive bidding procedures and allotted prime urban land to them for a song…” Sarma was critical of the modalities of handing over land to Satyam group companies to build a port, a special economic zone and luxury housing projects. His words were ignored.
The managing director of the Delhi Metro Rail Corporation (DMRC), E. Sreedharan, criticised the manner in which the Andhra Pradesh government had awarded a build-operate-transfer contract for constructing the Hyderabad Metro Rail project to a consortium led by Maytas. He wrote a letter to Deputy Chairman of the Planning Commission Montek Singh Ahluwalia predicting that there would a “big political scandal some time later”. Sreedharan alleged that Maytas would “reap a windfall profit of four to five times the land price” and that the state government was “selling the family silver”.
The Andhra Pradesh government threatened to sue the DMRC chief for defamation. Sreedharan refused to apologise. The promised lawsuit against him never materialised. It appears that the accounts of not only Satyam but Maytas as well were fudged — Raju himself wrote in his letter of January 7 that the “aborted Maytas acquisition deal was the last attempt to fill the fictitious assets (of Satyam) with real ones”. The construction of the Hyderabad Metro by the Maytas consortium has become doubtful.
Raju had earlier been paraded before Bill Clinton as a shining example of “Andhra-preneurship” by former state Chief Minister N. Chandrababu Naidu. Like most opportunistic businessmen, he switched his loyalties to the Congress government led by Y.S. Rajsekhar Reddy. Today, both Naidu and YSR are busy denying that they were ever close to Raju — like industrialists, politicians too are creatures of convenience.
Even as the disgraced tycoon and his brother spend time in police custody, the question remains as to why Raju chose to acknowledge his crimes in the manner he did. Did he realise that time was running out on him, that it would better to admit to wrongdoing before someone else spilt the beans? Did he think that those who could punish him would be lenient that way? Did he realise that it might be better for him to spend time behind bars in India instead of the US?
The answers to these questions may not become known in a hurry. Public memory may be short. Who remembers Haridas Mundhra, now in his eighties and living in Kolkata? Yes, India’s IT industry will become dynamic all over again. And who knows? Hyderabad as a centre for business process outsourcing and computer software development may still rival Bengaluru, Pune and Gurgaon. Raju’s long-term legacy could well be positive: it could spur corporates to respect the rule of law and think twice before cooking books of account with or without the assistance of friendly auditors. But none of all this may happen — till the next scam surfaces.
(Paranjoy Guha Thakurta is an independent journalist and educator)