Ramalinga Raju also fudged employee headcount

The fourth largest IT major inflated staff numbers by well over 10,000 people, Andhra Pradesh’s public prosecutor Ajay Kumar told a local Hyderabad court. What's more, the erstwhile promoters and management siphoned off money, at an average of Rs200mn a month as salaries to fictitious accounts, for at least five years. Enough evidence is also emerging on large scale fund diversion and fictitious bank deposits to the tune of Rs33.6bn. The possibility of insider trading by the promoters could not be ruled out either, Kumar told the court. Disgraced Satyam founder B. Ramalinga Raju also bought lands not only in India but in other countries also, prosecutors told the court. Kumar also said that former Satyam CFO, Srinivas Vadlamani, had confessed to the fraudulent activities. Raju’s lawyer, Bharat Kumar denied all allegations, saying that no written application of Raju’s and Vadlamani’s confessions was produced before the court.

A local court on Friday posted the hearing on bail petitions of Ramalinga Raju, and its ex-CFO, Vadlamani Srinivas, to January 27. The chief metropolitan magistrate posted the bail plea of B Rama Raju, brother of Ramalinga Raju and former MD of Satyam, to January 28. Separately, the Andhra Pradesh CID arrested Gopal Krishna Raju, general manager of SRSR Holding, through which Ramalinga Raju's family held a stake in the IT firm. SRSR Holding is owned by Ramalinga Raju's sibling, Suryanarayana Raju, whose house was also searched by the police with regard to the Rs78bn accounting fraud in the IT major. In related development, the Registrar of Companies (RoC) filed a caveat in the Andhra Pradesh High Court with regard to the Company Law Board orders restraining former whole-time directors, chairman, chief financial officer and company secretary of Satyam from selling or mortgaging their assets.

Tarun Das, one of the government nominees on Satyam board, and the Government admitted to receiving several approaches from potential suitors. Larsen & Toubro (L&T) increasingly emerged as a strong contender for buying Satyam, though the company denied any such move. L&T chairman A.M. Naik also met top government officials in New Delhi to discuss the Satyam issue. The engineer major also increased its stake in the Hyderabad-based company from 4% to 12%, claiming that it was doing so to protect its interest. Reports suggested that Tech Mahindra, Patni (along with PE firms), Essar group and iGate Global remained in the hunt for acquiring Satyam or parts of it. Separately, Infotech Enterprises said that some of Satyam's customers had approached it but refused to name any of them. Some clients notified Satyam that if uncertainty persists they could terminate their relations with the company.

The new board of Satyam said that additional funding arrangements and the appointment of the top management were in the final stages of being concluded. The board said that it had narrowed the shortlist of candidates for chief executive and chief financial officer to the final three and the decision would be made in the coming week. Existing customers continue to release new work orders and collections from receivables were robust, it said.