Satyam scam: How Ramalinga Raju spun India's biggest corporate lie

What Was the Scam?

Unlike the complicated corporate scandals of the West, the Satyam scam was actually quite simple. Founder Ramalinga Raju and the company’s top management overstated the number of clients, revenue, margins and profits from 2003 to 2008. For financial year 2008-2009, Satyam reported revenue of over Rs 5,000 crore. In reality, it was a few thousand crores of rupees short of that. Single-digit margins were inflated to above 20%.

How He Did it?

Satyam created fake invoices and forged bank statements to show a mountain of cash to frame a rosy picture. Over the years, as bills to fake clients were never paid, the company overstated its dues from clients. When people noticed the growing discrepancies, they either turned a blind eye or deferred to instructions from the chairman’s office. he external auditors trusted the forged bank statements.

How it Unravelled?

Without red flags from the external auditors, Satyam’s scam broke in one of the most unlikely ways – Ramalinga Raju confessed on January 7, 2009, in a letter to the Satyam board and sent copies to capital market regulator Sebi and the stock exchanges.

He insisted that he had not taken a ‘single rupee from the company’ and that he had made every attempt to eliminate the gap between the fictitious and the actual performance.

"It was like riding a tiger, not knowing how to get off without being eaten", Raju said in the letter.

On Thursday, Raju was sentenced to 7 years in jail and a fine of Rs 5 crore.