Media dub Satyam scandal 'India's Enron'
A billion dollar false accounting scandal at one of India's biggest outsourcing firms dominated the country's media on Thursday, with newspapers likening it to that at US energy giant Enron.business Updated: Jan 08, 2009 12:52 IST
A billion dollar false accounting scandal at one of India's biggest outsourcing firms dominated the country's media on Thursday, with newspapers likening it to that at US energy giant Enron.
The Economic Times described Satyam Computer Services founder and chairman B. Ramalinga Raju's admission that accounts and assets had been falsified and profits inflated as "the biggest fraud in India's corporate history."
"The shame and scandal has stunned India Inc., and left lakhs (tens of thousands) of investors and 53,000 staffers out in the cold," it said.
The Hindu said the Satyam scandal was "shocking beyond belief"; The Asian Age called it "the Great Dot Con"; while the Times of India said it was ironic that the firm's name means "truth" in Sanskrit.
At the Business Standard, Raju's revelations of cooking the books to the tune of more than 50 billion rupees (one billion dollars) in its September end balance sheet were described as "India's Enron".
"The scale of the fraud and manipulation in the financial statements of the company is mind-boggling", one commentator wrote, calling it "reminiscent of the Enron Andersen days".
Enron collapsed in 2001 after revelations that bosses hid company losses and hyped the stock's value while selling their own shares on the sly, leading to prosecutions.
Auditors Arthur Andersen were also convicted after allegations that employees shredded documents to hide evidence relating to the scandal.
Raju said in his resignation statement that none of the other board members was aware of the firm's actual financial situation and that no one had profited from the inflated results.
Questions were asked in the media about the role of Satyam auditors PriceWaterhouseCoopers as well as the robustness of corporate governance and financial regulation in India.
Others feared for the effect on foreign investment, which is already being squeezed by the global economic slowdown, and India's reputation as a place to do business.
The Indian Express said the timing "could not have been worse", with a weak stock market, a reluctance on the part of domestic investors to take risks and their foreign counterparts pulling out of emerging markets.
"This will only exacerbate that problem, just when the Indian economy needs momentum to grow in the opposite direction," it said in an editorial.
The revelations were also "simply catastrophic" given the potential shift in attitudes towards outsourcing as US president elect Barack Obama prepares to take office, it added.