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.
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