Govt sets liability record straight, calls Raju's bluff

HYDERABAD: The Central Bureau of Investigation (CBI) has backed the claim of the government-appointed board of Satyam Computer Services that the firm does not owe any money to the front companies floated by B Ramalinga Raju, the disgraced founder of the company, and his family.

Raju, who admitted to perpetrating a Rs 7,000-crore financial fraud, claimed that he had infused Rs 1,430 crore into the IT firm by pledging shares held by his family in several front companies.

His contention was that Satyam owed around Rs 1,230 crore to his family members.

But the premier investigating agency has debunked his claim. It has not found any proof that Raju infused Rs 1,430 crore into the company. ���There have been no entries in Satyam���s books of accounts on the fund infusion. We have only found letters written by directors of these 37 front companies on January 8, staking a claim on the money lent to Satyam. These letters were written at the behest of Raju,��� said a senior CBI official.



CBI���s revelation vindicates claim by the government-appointed board of Satyam that such a liability simply does not exist. Hence, a potential bidder of Satyam does not have to factor in Rs 1,230 crore liability, while putting a price tag on the company.

Suitors for Satyam have been concerned over the extent legal and financial liabilities of the beleaguered IT firm. Satyam is facing a dozen-class action suits from investors in the US, besides another suit filed by UK-based online mobile service provider Upaid. Satyam���s US lawyers, however, reckon that the Upaid case is a weak one.

CBI has proof that Raju and eight others accused in the scam had doctored accounts for seven years by inflating revenues and profits, thus boosting its cash and bank balances; showing interest income where none existed; understating liability; and overstating debtors position (money due to it).

Raju and his family also floated around 327 front companies ��� several of them for land deals. Many non-banking financial companies (NBFCs) took a significant exposure to these front companies. One of them suffered mark-to-market losses of around Rs 50-60 crore, following erosion in the value of Satyam shares in January.

Together, NBFCs lent around Rs 1,744 crore to front companies, including Pavitravati Greenfields, Vishnupadi Greenfields, Vindhya Greenfields and Narmada Greenfields. These companies are owned or controlled by Ramalinga Raju and his family, and loans were given against shares pledged by the family members. Raju had claimed that 37 companies had pumped in around Rs 1,430 crore into Satyam, which CBI has refuted.

The promoter���s family held over 18% stake in Satyam in 1992, but their holdings slid to 1.27% at the end-2008. The promoters had pledged all their shares held in a corporate entity, SRSR Holdings, during the bull-run in the market. But institutions were forced to sell these shares unable to meet margin calls.

Raju confessed to the scam, a fortnight after the firm���s botched attempt to buy two firms linked to the promoter���s family.

CBI has charge-sheeted Raju and eight other accused in the scam under various sections of the Indian Penal Code for ���criminal conspiracy, cheating, cheating by impersonation, forgery of valuable security, forgery for the purpose of cheating, using a forged document as genuine, for falsification of accounts and tampering evidence���.

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LIC suffers Rs 948-cr mark-to-market losses

Several institutional investors and banks are sitting on huge mark-to-market losses on their investments in scandal-hit Satyam Computer Services, following the erosion of the IT firm���s share price in January this year, according to the Central Bureau of Investigation.

India���s biggest domestic investor Life Insurance Corporation (LIC) has taken Rs 948 crore hit, after the firm���s disgraced founder B Ramalinga Raju confessed to perpetrating a Rs 7,000-crore financial fraud, according to the charge sheet filed by CBI.

LIC had an exposure of 2.81% in Satyam at the end-December 2008 (LIC of India 1.18% and LIC Money Plus 1.48%). No other life insurer has been mentioned in CBI���s charge sheet.

A clutch of banks including UCO Bank, Punjab National Bank, Union Bank of India, Allahabad Bank, Indian Bank and Oriental Bank of Commerce have suffered mark-to-market losses of around Rs 10 crore, said CBI.