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India’s Dr Jekyll and Mr Hyde
The first judgment on l’affaire Satyam has been delivered, a full six years after Ramalinga Raju wrote his famous riding-a-tiger letter. Ten men, including two auditors, have been jailed for seven years.

When the massive accounting fudge happened in Enron, USA, it took the energy house, as also its world-famous auditors, Arthur Andersen, to the cleaners.  We proudly told ourselves that nothing like this would ever happen in India.
Around that time (2001), one of India’s under-rated icons, the gentlemanly Byraju Ramalinga Raju, began playing with the books. Eight years later, in 2009, the ‘truth’ about Satyam would come out with Raju voluntarily confessing to the larceny.  It was the most daring white-collared crime that India had ever seen. As to why Dr Jekyll made public his Mr Hyde face, we will never know. We can only hazard a guess: but as skeletons came tumbling it was clear Raju cruelly raped India’s corporate law and perhaps even its accounting standards.

The dirty picture...

India cannot afford to forget this shame.  We cannot just say, we have moved on. As George Santayana wrote, in a different context, during a different period (in The Life of Reason, 1905): “Those who cannot remember the past are condemned to repeat it.” Lest we forget what happened, let me narrate the story in brief. 
First, the dramatis persona. The man with an Ohio MBA, Ramalinga Raju, beefed up both Satyam’s top as also its bottom line, so that it could be amongst IT biggies. It was another matter that the world’s number one audit firm, PwC, audited Satyam and could not spot the fudge. Interestingly, Raju almost always fixed his board meeting after the announcement of the results of bell-weather companies, Infosys and WIPRO. The reason was simple.  It helped him decide how much profit he should report! The head of a Satyam vertical once confessed that whenever quarterly results were announced, he would find his vertical’s reported turnover way above the actual turnover.  He never knew where from the extra numbers came. Now he knows they came from thin air.
In the end, when the dirt hit the roof, there was a Rs 7000 crore (at that size it didn’t matter whether it was 7000 or 8000) hole in the balance sheet. Everything looked wrong. As someone witted: “Nothing on the ‘left’ was right and nothing on the ‘right’ was left.”  For those not familiar with accounting, liabilities are recorded on the left and assets are listed on the right side of the balance sheet. The fictitious Rs 5000 crore cash was the icing on the cake.
Was Raju’s confession one of a man who had suddenly come to terms with his conscience? Or did the investment bankers threaten to expose him?  Or did he throw up his hands because more sinister people (read politicians) were breathing down his neck?  Was jail his best protection? We will never know that. 
However, what we do know is that Raju was crazy about real estate. The profits he dressed up helped him shore the share’s market price. He could pledge these higher priced shares for more cash, with which he bought land here, there and everywhere, including allegedly in multiple countries. But, in the winter of 2008, as both share and real estate prices began to tumble, he ‘landed’ himself in a soup. His game was up. If only the merger of Maytas with Satyam had taken place, we would never have been wiser. Raju would never have had his date with his conscience. I will soon explain that. 


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