Mumbai, July 15: B. Ramalinga Raju — India’s biggest corporate shyster — and four others were barred today from accessing the country’s capital markets for 14 years and directed to return with interest Rs 1,849 crore worth of unlawful gains that they made through insider trading and illegal pledge of shares.
The interest payout will work out to over Rs 1,600 crore as Sebi whole-time member Rajeev Kumar Agarwal ordered them to pay interest at the rate of 12 per cent from January 7, 2009 — the day that the former chairman of the erstwhile Satyam Computer Services had confessed he had cooked the books of the infotech giant for years with the scale of the accounting scam estimated at Rs 10,000 crore.
He claimed at that time that he had been “riding a tiger not knowing how to get off without being eaten”.
The money has to be deposited with Sebi within 45 days.
The others who were named in the Sebi order were Raju’s brother B. Rama Raju, then managing director of Satyam; former chief financial officer Vadlamani Srinivas; former vice-president G. Ramakrishna; and V.S. Prabhakara Gupta, former head of internal audit.
In his 65-page order, Agarwal said the five persons “committed a sophisticated white collar financial fraud with pre-meditated and well thought of plan and deliberate design for personal gains and to the detriment of the company and investors in its securities”.
The regulator said the financial frauds were inimical to the interests of the investors in securities and endangered market integrity.
“I am convinced that this is a case where befitting enforcement action is necessary to send a stern message to the market to create an effective deterrence,” the Sebi whole-time member said in his order.
After the fraud came to light, the government had ordered an auction for the sale of the company in the interest of investors and employees of what was known at that time as the country’s fourth-largest IT firm.
The company was acquired by Tech Mahindra, then renamed as Mahindra Satyam and eventually merged with Tech Mahindra.
Raju and the others are also facing trial before the special court in Hyderabad on charges that are being prosecuted by the Central Bureau of Investigation (CBI). The court is expected to announce the date on which it will give its verdict on July 28.
According to Sebi, Raju brothers have made “unlawful gains” to the tune of Rs 543.93 crore from the sale of shares and Rs 1,258.88 crore by way of pledging of some shares.
Srinivas, Ramakrishna and Gupta have made “unlawful gains” worth Rs 29.5 crore, Rs 11.5 crore and Rs 5.12 crore, respectively, through the sale of shares.
The Sebi whole-time member said his investigations showed that Raju and his associates “colluded and connived with each other in actively inflating the revenues and understating the liabilities of Satyam Computers by manipulation and fabrication of the books of account and financial statements and falsification of the information presented in the same”.
He said they “deliberately projected a grossly false picture of the financials of Satyam Computers to millions of investors”.
Ramalinga Raju and Rama Raju, the chairman and managing director, respectively, of Satyam Computers at the relevant time, were “insiders”, while Srinivas, Ramakrishna and Gupta were “connected person” who were actively involved in the manipulation of books of account and misstating of the financials of Satyam.
Relying on unpublished price-sensitive information, they sold and pledged shares of Satyam to derive gains on the basis of the same.
They took advantage of the high valuation that had been given to Satyam by the market as it was not aware of the true financial position of the company, the regulator said.
“The noticees (Raju and four other officials), apart from above contraventions, have failed to observe their fiduciary duties and have violated the principles of corporate governance in general and the obligation of CEO/CFO certification stipulated in clause 49 of the Listing Agreement, in particular,” it added.
The Satyam saga unravelled in December 2008 soon after the software company announced its intention to acquire a 51 per cent stake in Maytas Infra Ltd and a 100 per cent stake in Maytas Properties, promoted by Raju’s sons, Teja Raju and Rama Raju, for around $1.6 billion.
The deal was severely opposed by other investors in the company, forcing Raju to call off the proposed acquisition within a day of the announcement, on December 17, 2008.
Eventually, Raju admitted that he had been trying to fill a hole in Satyam’s balance sheet through the Maytas buyout, which would have allowed him to fudge the accounts for some more time.
Raju has been out on bail since November 2011. There is no way to determine whether Raju and his associates have the money to pay the amount — or even a desire to do so.