Frauds Investigator SFIO clears Satyam’s independent directors, puts PW in the dock
18 Apr 2009
The Serious Frauds Investigation Office has held audit firm Price Waterhouse guilty of falsification of the accounts in Satyam Computer Services, while clearing the four independent directors from complicity in the Rs7,800-crore fraud at the company.
In its over 14,000-page report submitted to the government after a three-month-long investigation, the SFIO said the auditors of Price Waterhouse were aware of Satyam founder B Ramalinga Raju's misdemeanours but kept silent. It added that the two PW partners working on Satyam's financials - S Gopalakrishnan and Talluri Srinivas -were guilty of account falsification.
Price Waterhouse reacted on Saturday by saying, ''The two Satyam audit partners and PW India were victims of that fraud.'' Gopalakrishnan and Talluri are in a Hyderabad jail and are being grilled by multiple agencies, including the Central Bureau of Investigation.
The investigative agency of the corporate affairs ministry said that the two auditors involved themselves in the fraud by feigning ignorance about their ability to question the authenticity of the documents provided to them. ''The auditors are supposed to get the confirmation from banks and others. They cannot follow everything said by the management for so many years,'' it said.
According to the SFIO, the auditors knew of the audit failure through a report generated by Satyam's own systems department in 2007. The report pointed out that fake invoices could be generated in the system, but the auditors continued to verify the audit system as correct.
Independent directors innocent
But the SFIO said the four independent directors - Vinod Dham, Mangalam Srinivasan, K G Palepu and T R Prasad - had no knowledge about the accounting fudge that took place allegedly at the behest of Ramalinga Raju, his brother and other top executives of the software services firm.
The SFIO also questioned the then whole-time director and senior executive Ram Mynampati, but reportedly found no clear evidence linking him to the scam.
The government had ordered an SFIO probe into the scam on 11 January, soon after Raju admitted the fraud at the company. The company's founder disclosed that he had falsified profits for several years.
The role of independent directors had come under scanner in late December itself when Satyam said that its board has unanimously approved a proposal to acquire two firms promoted by Raju's family -- Maytas Infra and Maytas Properties.
