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January 8, 2009

AUDITORS PRICE WATERHOUSE : Will Surely Pay the PRICE as there is not enough WATER to douse the SATYAM FLAMES that are engulfing their HOUSE !

5 Comments / Controversies, Corporate Governance, Information Technology, Interesting News Sightings, INVESTOR MISTAKES, Reflections, Satyam : The Sordid Asatyam Saga / By

Within just one day of Satyam’s Promoter Chairman,Ramalinga Raju confessing to cooking up the Books, in his letter to the Board,the Auditing House and one of the ‘Big Four’,PRICE WATERHOUSE is already being relegated to history for their role in this unfolding and sordid Satyam Saga…remember how the Auditing Giant,Arther Anderson wound up when Enron failed !?

Price Waterhouse audits over 100 listed Indian companies like the Auto Giants Maruti and even the huge HCL Group in the Software Sector…so it’s not that they don’t have any experience of auditing software majors…..So their obvious lapses when auditing Satyam was a huge shocker

I remember that in 2007, when I was at a High Profile Corporate Governance Seminar in Mumbai where the dignitaries were Heads of Exchanges and Government Ministries and Leading Corporate and Auditing Houses from all over India,there was a very ‘show offy’ lady from Price Waterhouse whose presentation revolved around their specially developed software of a Corporate Governance System that clould be implemented by Corporates….When the Chief Secretary of the Orissa Government,one Mr Patnaik,asked her how much would this Software and Implementation Cost and could it be applied to PSU and Government Set Ups,this lady had the bloody cheek and arrogance to state ” You probably would not be able to afford it !…It would cost over Rs One Crore “….There was a shocked and studied silence for a few moments on her brazenness…When I was asked to address the audience I commented on this sort of arrogant and snobbish mindset by professionals..She was just one of a Tribe, that sadly has many members,who have inflated egos and inflated opinions of themselves and their firm and status….I daresay it’s a contagious American Banking and Corporate Trait…but look where it’s landed America and it’s once major Powerhouse Icons !

Auditors are appointed by Shareholders at the AGM to ensure Independent Review and Audit of the Financial Books and Assets…but for all purposes their Independence is severely compromised as they have to interact with Management and Promoters to solicit increase in Fees and potential other Business like Certification,Tax and Conultancy work in Mergers and Acquisition and Valuation Situations….even though the ICAI and the Companies Act has directives that should be followed and practises so as to not create any Conflict of Interest in Auditors,these firms find a way out by routing business other than audit to other front or related and friendly firms…as this is widely practised by most firms in this competitive era,the ICAI is not a very strict enforcer of directives and guidelines….this strengthens and makes for a compelling case for the government to intervene and set up a seperate legal body to conduct Audits or create a Regulatory Body for Auditors.In fact the New Amendments to the Companies Act will involve stricter and more stringent compliance by Auditors and Directors read more

NOW TWO MORE SERIOUS QUESTIONS EMERGE IN THIS SORDID SATYAM SAGA UNFOLDING!

3 Comments / Controversies, Corporate Governance, Derivatives Strategies, Information Technology, Insider Trading, Interesting News Sightings, INVESTOR MISTAKES, Reflections, Satyam : The Sordid Asatyam Saga, STOCKS, VALUATION / By

Now Two More Serious questions need to be answered in this continuing Satyam Saga !

QUESTION NO 1

DID RAMALINGA RAJU INTIMATE LENDERS TO SELL HIS PLEDGED SHARES BEFORE RELEASING HIS CONFESSION LETTER TO REALISE A BETTER PRICE TO CLEAR MORE OF THE LOAN ? 

This is very much posssible as the Promoters Holdings was 8.61 % on December 16,2008 when Satyam announced the controversial Maytas Takeover Proposal but has since dropped to below 4%…It so transpires that promoters had pledged their shares to raise funds…Ramalinga Raju claims in his confession that the understated  Liability of Rs 1230 crs in Satyam is on account of his raising funds for the Company against his own Shares !

Lenders have sold these pledged shares post December 16,2008….Question arises as to whether the disgraced Ramalinga Raju pre-warned the Lenders to selloff before he released his confession letter yesterday morning…This would have got the Lenders a better price as Satyam share was murdered yesterday from Rs 175 to close at Rs 40 on release of the Confession Letter

Another Thought !…If Raju claims he arranged Rs 1230 crs for Satyam against his shares then what was the accounting entry passed in the Books of Satyam for this ?…as Monies should have come into Satyam,the Debit obviously would have been “Bank” but where was the Credit given for the Double Entry ?…If it was ,as it should have been,given to the Lenders to reflect their Lender Status in the Books then where is the understatement ?…..Understatement arises only when the Credit was not given to the Lenders but to some other Accounting Head…It cannot have been a Single Entry…Books would not have tallied !….What the hell were the auditors Price Waterhouse doing ? How did these entries escape them in both Substance and Form ! ?

I want to know where the Credit was given in the Satyam Accounts for such funds as Raju claims were arranged by him against his shares !   

OUESTION NO 2

NOW WE KNOW WHY THE MAYTAS PROPOSAL WAS STRUCTURED THE WAY IT WAS ! QUESTION IS WHICH ‘BIG FOUR FIRM ‘ CONNIVED WITH SATYAM TO BRING UP THE VALUE OF THE MAYTAS DEAL TO US $ 1.6 BILLION ! TO MATCH THE SATYAM ASSET HOLE ?

IF INDEPENDENT DIRECTORS WERE IN THE DARK,THEN WHEN THIS MAYTAS DEAL WAS PROPOSED AT THE BOARD,THEY SHOULD AND WOULD HAVE IMMEDIATELY QUESTIONED WHY ALL SATYAM CASH WAS BEING USED AND WHY THE DEAL WAS BEING ROUTED THROUGH SONS OF SATYAM PROMOTER RAMALINGA RAJU AND NOT DIRECTLY GIVEN TO MAYTAS !…AT THIS STAGE THESE GREAT ACADEMICS,PROF KRISHNA PALEPU OF HARVARD,PROF RAMMOHAN RAO,(DEAN OF ISB) AND DR MANGALAM SRINIVASAN AND INTEL ICON, MR VINOD DHAM WOULD HAVE REALISED THE DUBIOUS REASONS FOR SUCH A STRUCTURING AND THE CRIMINALITY THAT WOULD STAND EXPOSED…THEY SHOULD HAVE NOTED THEIR DISSENT IN THE MEETING ! read more

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