Prosecutors pursuing the fraud at Satyam Computer Services
Ltd. said Tuesday the Indian technology outsourcer's founder, B.
Ramalinga Raju, should be denied bail because he could slow the
investigation if released.
Their assertions came after an employee of a company managed by Mr.
Raju's family told police that he had been instructed to hide documents
connected to land purchases by the Raju family, according to
prosecutors and a court document reviewed by The Wall Street Journal.
in the southern Indian city of Hyderabad, where Satyam is based, are
investigating whether large amounts of funds were siphoned from Satyam
to Raju family companies that invested in property. The investigation
began after Mr. Raju earlier this month wrote to Satyam's board
admitting that he had inflated the company's financial results for
several years, including the creation of a fictitious bank balance in
excess of $1 billion. He resigned as Satyam's chairman at the same time.
S. Bharat Kumar, a defense lawyer for the Raju family, rejected the
claim made by prosecutors that Mr. Raju might try to tamper with
evidence or intimidate witnesses. Mr. Raju is being held on charges of
cheating, breach of trust and forgery. Mr. Kumar pointed out that Mr.
Raju turned himself in, and wasn't trying to block the investigation.
Mr. Raju would cooperate fully with authorities if granted bail, he
said. He also rejected suggestions that funds were diverted for land
The court is expected to decide Wednesday on whether Mr. Raju is released on bail.
Over the weekend, D.V. Gopala Krishnam Raju, general manager of SRSR
Advisory Services, an investment company run by B. Ramalinga Raju's
younger brother, was arrested and charged with involvement in the fraud
and with trying to tamper with evidence. According to court documents,
the general manager told interrogators that he was asked to hide
documents connected to the Raju family's land holdings. It isn't clear
if D.V. Gopala Krishnam Raju is related to B. Ramalinga Raju.
Over the past two weeks, B. Ramalinga Raju's brother, B.
Suryanarayana Raju, director of SRSR Advisory, "was instructing me in a
hurried manner to shift all original documents to various places to
conceal them from police," D.V. Gopala Krishnam Raju told police,
according to the document.
The general manager took five boxes of documents relating to
properties owned by more than 150 companies connected to the Raju
family and moved them to new locations around Hyderabad, including
apartments, offices, a guest house and a mango farm, according to the
Mr. Kumar, whose legal team also represents D.V. Gopala Krishnam
Raju and B. Suryanarayana Raju, said his clients hadn't engaged in any
evidence tampering or efforts to conceal documents, and that D.V.
Gopala Krishnam Raju's statement had been extracted "under coercion."
Separately, two partners of accounting firm Price Waterhouse, who
are being held in connection with the accounting scandal at Satyam,
have been suspended pending the outcome of the investigation, Price
Waterhouse said in a statement Tuesday. Price Waterhouse is an Indian
arm of PricewaterhouseCoopers, the international accounting giant.
The partners, S. Gopalakrishnan and Srinivas Talluri, were arrested
Saturday by the Indian police on charges of criminal conspiracy and
cheating in connection with the fraud investigation. Neither Mr.
Gopalakrishnan nor Mr. Talluri could be reached for comment Tuesday. A
lawyer for both declined to comment.
"We're not questioning their integrity, or making any judgment on
the quality of their professional work," said a PricewaterhouseCoopers
spokesman, commenting on the partners' suspension. "They are still part
of the firm, they'll still be paid and we'll obviously assess the
situation once it's over."
Also Tuesday, Price Waterhouse said Thomas Mathew, the head of audit
and accounting for PricewaterhouseCoopers in India, would step down,
but remain a partner in the firm. "Mr. Mathew had no connection with
the audit of Satyam. In light of the present situation, however, he
believes it would be appropriate for him to relinquish his management
position," said a Price Waterhouse statement.
Mr. Mathew wasn't available for comment Tuesday, according to a spokesman for the firm.
Meanwhile, Satyam's government-appointed board of directors on
Tuesday said it appointed Goldman Sachs and Avendus Capital to advise
on strategic options, including a possible sale of the company. It also
has completed most of its discussions on the financing needed to meet
immediate operational expenses, Satyam said in a statement, adding the
company will pay January salaries as scheduled.
The board also reiterated its belief that the company hadn't
inflated its employee numbers. Further checks and validations have
reinforced the board's belief the earlier reported numbers are correct,
Government prosecutors Thursday told the court that B. Ramalinga
Raju used salary payments to 13,000 fictitious employees to siphon
millions of dollars from the outsourcer for land purchases. Satyam has
only about 40,000 employees, instead of the 53,000 it claims,
prosecutors said. Mr. Kumar, the Rajus defense lawyer, said the
prosecutors' claims were "absolutely false."
The board has already received several proposals from other
companies including private-equity firms, said T.N. Manoharan, a board
member. One of the interested parties, Indian construction company
Larsen & Toubro Ltd., has a "reasonable chance" of acquiring Satyam
after raising its stake in the software exporter to 12%, A.M. Naik,
Larsen's chairman and managing director, said in a conference call with
Satyam's shares closed 21% higher at 47.15 rupees on the Bombay Stock Exchange.
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