Written by Alice Payne
Posted on 14/04/2015

The Enron of India – the verdict on India’s largest corporate fraud case

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The case that became known as ‘India’s Enron’ was finally drawn to a conclusion last week when Ramalinga Raju, the founder and former chairman of software outsourcing company Satyam Computer Services, was sentenced to seven years in jail, along with nine other associates.

Satyam Computer Services was once India’s fourth-largest software services firm with clients ranging from the US government to a third of Fortune 500 companies. Its legacy today is a far cry from its former success: as one of the largest corporate fraud cases in India’s history, it’s now known as the company that defrauded investors of $2.28 billion. The question remains, how was yet another corporate fraud scandal able to play out?


The company rose to success in the late 1990s when Raju identified the wealth of outsourcing potential. After a lucrative career, in late 2008, Raju announced that Satyam, which means ‘truth’ in Sanskrit, would be acquiring his sons’ company Maytas for $1.6 billion. The surprise announcement led to a dramatic fall in stock price.

Just one week later, after further investigation, the World Bank barred Raju from doing business for eight years, citing data theft and bribery charges. A mass exit from the firm followed and at the end of December the company invited bids for a 51% stake after the Securities and Exchange Board of India waived a mandatory floor price for the auction.

With an investigation in full motion, in early January 2009 Raju shocked the market when he revealed in a five-page letter that he had hugely inflated the company’s assets by booking false interest, exaggerating cash balances and misstating liabilities and debt.

Rise and fall

As Indian opportunities in IT began to rise, Raju became a poster boy for prosperity. Originally from a family of farmers, he started a highly lucrative company, won overseas contracts and employed thousands of staff.

However, fast-forward to 2015 and Raju and the rest of the accused were found guilty of falsifying accounts and income tax returns, collaborating to inflate the company’s revenue and fabricating invoices, in addition to other crimes. So what went wrong?

While we may never know the full answer, some insight was given in his resignation letter in 2009, in which Raju revealed the extent of his financial deception and confessed, “It was like riding a tiger, not knowing how to get off without being eaten”.

National repercussions

The scandal, however, extended beyond Raju and his Satyam associates. Price Waterhouse (PW), an arm of PriceWaterhouseCoopers (PwC) India, was also implicated. In 2011, the Securities and Exchange Commission (SEC) sanctioned five India-based affiliates of PwC who acted as independent auditors of Satyam for “repeatedly conducting deficient audits of the company’s financial statements and enabling a massive accounting fraud to go undetected for several years”.

The PW India affiliates were forced to pay a $6 million penalty – which is the largest ever SEC fine levied on a foreign-based accounting firm. Furthermore, two of PW’s former employees were convicted by the courts for their involvement in facilitating fraud, which has undoubtedly caused reputational damage and huge embarrassment to the firm.

With such widespread publicity and Raju’s inevitable post-hubris downfall, it’s hoped in India that this case will be a lesson to others.

“The judgment given by the court will have far reaching consequences in checking corporate frauds and shall also act as a severe deterrent,” said Rajesh Narain Gupta, managing partner at law firm SNG & Partners.

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