Satyam-Maytas Scam : Revealing Minutes of the crucial December 16,2008 Board Meeting to discuss and approve the acquisition proposal

The Minutes of the Crucial December 16,2008 Meeting of the Board of Directors of Satyam to discuss and approve the Maytas acqusition proposal are now in public domain

Phew ! I read the Twelve pages of the Minutes and can only say this !

NONE IN THE BOARD WAS ABOVE BOARD !

The way the Meeting Progressed from 4 pm and the nature of the various presentations that were made and the Information and explanations given by Top Management and Working Directors…all actually provide answers to some very vital questions that are being raised on

  • Complicity of Ram Mynampati,President and Whole-Time Director who made a presentation on the need to diversify from just being a core IT Company…His contradictory stance and feigning that he was in the Dark can be countered strongly
  • Complicity of Srinivasu Satti,Head (Mergers and Acquisitions) and who made the presentation to explain and justify the Maytas Proposal…He had to know !
  • Complicity of V Srinivasa,CFO…his justifications,information and explanations were taken at face value by the Independent Directors,when some very very basic queries automatically come to the mind when you hear V Srinivasa….I’m sure Independent Directors too would have had such queries race through their mind…why did they fail to voice them ! ?  
  • Dereliction of Duty and Prior Awareness of Maytas Deal by each and every Independent and Non Executive Director…They failed to raise even basic queries on Structuring,Financing,Leveraging and Valuation of the Deal…Queries that they raised were simply too general and they failed to get into specifics,like they should have
  • Controversial Valuation of Maytas Properties by Ernst & Young and the existence of a Non Disclosure Agreement with them

I shall endeavour to blog and justify each point above seperately in the days to come 

Satyam Auditors, Price Waterhouse, issues a statement late today..Let’s put it in perspective

In this unfolding Satyam Saga unleashed by Chairman,Ramalinga Raju’s confession on fudging accounts for years,this evening we had their auditors,Price Waterhouse releasing a statement defending their audit of Satyam ,stating it complied with generally accepted auditing standards in India and that there was appropriate evidence to support their audit

They have also ,under the excuse of client confidentiality,refused to give more details

Come on Price Waterhouse !…what Client !? Satyam !?…legally it is the Shareholders (Satyam has over 2 lakh of them) who have reappointed you at the last AGM as the auditors…you have a fiduciary responsibility to them more than to Satyam…so hiding behind the Coat of Client Confidentiality is clearly ill- advised

It would ofcourse be interesting to see what their ‘appropriate evidence’ is.

But let’s put their role in perspective and in context of the last published Annual Report of FY 2007-8

Relevant Extracts from Satyam’s Annual Report of FY 2007-8 

Pages 39 and 40 

AUDIT COMMITTEE

The Audit Committee consists of 100 percent independent and non-executive directors.There were four Members….Prof M Rammohan Rao,Chairman,Dr (Mrs) Mangalam Srinivasan,Mr T R Prasad,Prof V S Raju….There were seven committee meetings in 2007-8 an were attended by the CFO,Head of Internal Audit and Statutory Auditors as Invitees.The Committee reviewed the adequacy of the Internal Control Systems and Internal Audit Reports and their compliance thereof. 

Page 56

Internal Control Systems and their Adequacy…Part of Managment’s discussion and analysis…Important Points

  • The Internal Audit,an independent appraisal function to examine and evaluate the adequacy and effectiveness of the Internal Control System,appraises periodically about activities and audit findings to the AUDIT COMMITTEE
  • Internal Audit ensures that transactions are executed and assets are safegaurded
  • The AUDIT COMMITTEE was constituted as a sub -committee of the Board of Directors and it consists solely of Independent Directors.The committee also holds discussions with statutory auditors,internal auditors and the Management.It also reviews with the statutory auditors the scope and results of the audit 
  • Compliance with Section 404 of the Sarbanes-Oxley Act 2002
  • Under revised Corporate Governance standards adopted by the Stock Exchanges a Certification has to be made by the CEO and the CFO of the effectiveness of the Internal Control Systems and that they have disclosed any deficiencies and how they were resolved to the Auditors and the Audit Committee

Page 60

Personnel Costs…Part of Managment’s discussion and analysis…Important Points

Personnel Costs were Rs 5045.54 crs ( 62.01% of Revenues ) for an aggregate employee base of 55360 of which 43279 were technical associates,2690 were non-technical associates and 9391 were onsite technical associates

Page 62

Auditors Report to the Members of Satyam Computer Services Ltd  

Point 2 : We conducted our audit in accordance with auditing standards generally accepted in India.Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement….We believe that our audit provides a reasonable basis for our opinion

Point 4 g goes on to give the auditors unqualified opinion that the financial statements that comprise the Balance Sheet,the Profit and Loss Account and the Cash Flow  as on March 31,2008 ,read with the notes give a True and Fair view inconformity with generally accepted accounting principles in India read more