Satyam: $1 billion of our cash doesn't exist
Wow. Satyam Computer Services, the world's fourth-largest systems integrator, just declared that $1 billion, or roughly 95 percent, of its Q2 cash...isn't.
Despite using PricewaterhouseCoopers as its accounting firm, Satyam's chairman, Ramalinga Raju, today declared that he has "systematically falsified accounts," as reported in The New York Times.
Wow. 53,000 employees serving one-third of the Fortune 500, and yet so much of its heft is a lie. Virtually all of the cash and bank loans Satyam reported in its second quarter do not exist. More than $1 billion in paper lies.
How it started or, rather, why it persisted, is a lesson in the importance of honesty, early and often:
In the four-and-a-half page letter distributed by the Bombay stock exchange, Mr. Raju described a small discrepancy that grew beyond his control. "What started as a marginal gap between actual operating profit and the one reflected in the books of accounts continued to grow over the years. It has attained unmanageable proportions as the size of company operations grew," he wrote. "It was like riding a tiger, not knowing how to get off without being eaten."
The first step down the wrong road led to many more, and ultimately to a situation in which it was easier to keep lying than to come clean. In Satyam's fraud is a lesson for us all.
Matt Asay brings a decade of in-the-trenches open-source business and legal experience to The Open Road, with an emphasis on emerging open-source business strategies and opportunities. Matt is vice president of business development at Alfresco, a company that develops open-source software for content management. He is a member of the CNET Blog Network and is not an employee of CNET. Disclosure. You can follow Matt on Twitter @mjasay. 
People in glass houses...
like enron right?
Auditing firms help perpetrating lies. From Authur Anderson to KPMG to Pricewatercooper. What is worse is the government collude with these RICH people to perpetrate these lies until there's a fall guy.
I'm not sure why I still pay taxes ... I guessed it's because the man has a gun behind my back to make me do it. Blah...
Look, W and his boys used a similar line of BS on the sale of the WMD's to the world. It's really all the same thing. Sell and tell people what they WANT to hear. The truth will NOT set you free. Money is thicker than anything, including oil.
As you correctly point out, the pivotal moment is the decision to cover up a *small* discrepancy. After that, like so many similar situations, the lie takes on a life of its own.
As internal auditor I know the cause of these ills.all the 5 audit big wigs are highly money minded and do anything for fees.Further the employees are not content rich and many know the IT tricks and not accounting and finance.In Uganda I had the expreience of unscrupulous behaviour of PWC and KPMG...etc
Some young boys who are below 30 and having no experience of any enterprise operations are appointed as auitors.These novices do not know whatis comapny law and other operations.they simply tally what is available and caannot find out the actuality of these contents in finance.Further these comapnies take care of these boy auditors with good hospitality and gifts.
All the IT majors d says in Satyam that he does not no the actual position of the financial statements.Simply talks about revenue aand expences.How can he carry on ? Govt should revamp the audit requirements of these IT companies and stipulate that only experience persons in operations and internal audit should see the affairs with independent probing attitude and action
If anything, this only proves the opposite - all the new laws resulting from Enron and WorldCom don't do much if you're trying to reign in people already breaking the laws already in place.
(and before someone gets their underwear in a knot at me because I'm referring to American statutes - yes I know this is an Indian company not bound by Sarbanes-Oxley - however most developed countries now have similar standards in place).
Satyam is traded on the NYSE, and thus is governed by SOX
- by danmandel January 11, 2009 2:47 PM PST
- It's time we ask the question. Are we getting values from outsourcing? We need to pro-actively call our politicians to make sure Obama reconstruction projects are not outsourced to Satyam and other Indian outsourcing companies operating in America. I challenge people speak up if your company or you know of companies who have outsourced their IT department or IT projects to outsourcing company. The situation becomes worst when the companies bring in workers under business, students (practical training visa) or H1 to work in America. Of then, the workers are underpaid, meanwhile the outsourcing companies are billing the clients $60 - $80 an hour.
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(16 Comments)It's time we put effort to train more programmers in American, and for corporate America to take a long term view of hiring, training and retaining programmers. Let's keep the America jobs for American to make America strong again.