Indian outsourcer Satyam Computer Services has agreed to pay a US$10 million penalty to the US Securities and Exchange Commission (SEC) to settle charges of financial fraud, the SEC has announced.
Satyam was plunged into crisis in January 2009, after the company’s founder, B Ramalinga Raju, stated that the company’s revenue and profit figures had been inflated for several years. The Indian government took charge of the company soon after, ordered the accounts re-stated, and selected another outsourcer, Tech Mahindra, to invest in Satyam.
India authorities also filed criminal charges against several former company executives, including Raju.
The SEC charged Satyam on Tuesday with fraudulently overstating the company’s revenue, income and cash balances by more than $1 billion over five years. The complaint, filed in the US District Court in Washington, DC, alleges that former senior officials at Satyam used false invoices and forged bank statements to inflate the company’s cash balances and make it appear far more profitable to investors.
Satyam's new leadership cooperated with the SEC investigation, which continues.
Satyam’s former senior managers created more than 6,000 fake invoices to be used in the company’s general ledger and financial statements, according to the SEC complaint. Satyam employees created bogus bank statements to reflect payment of the sham invoices, it added. This resulted in more than $1 billion in fictitious cash and cash-related balances, representing half the company’s total assets, the SEC said.
Besides agreeing to pay the $10 million penalty, Satyam has also agreed to train company officers and employees concerning securities laws and accounting principles, and improve its internal audit functions. Satyam also agreed to hire an independent consultant to evaluate the internal controls the company is putting in place, SEC said.
The settlement with the SEC will help Satyam relist on the New York Stock Exchange, after it is done with restating its accounts in accordance with US accounting rules. It expected to restate the figures in about eight months.
The company delisted its American depository receipts from the New York Stock Exchange last year as it could not meet an October 15 deadline to file accounts. Its shares continue to be listed on Indian stock exchanges.
In a related settlement, SEC said it sanctioned Satyam’s former independent auditors for alleged violations of US federal securities laws and improper professional conduct while auditing the company’s financial statements from 2005 through January, 2009.