Three More Satyam Officials Arrested - InformationWeek

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Three More Satyam Officials Arrested

List of employees connected to outsourcer's accounting scandal is growing.

Indian authorities have arrested three more employees at Satyam in connection with the massive accounting fraud at the outsourcer that's been dubbed "India's Enron."

India's Central Bureau of Investigation, the country's equivalent of the U.S. FBI, said Monday that it detained three senior workers from Satyam's finance department: a VP, a senior manager, and an assistant manager.

"They have been arrested for their active role in perpetration and involvement in the crimes committed by the accused already arrested in this case," CBI authorities said in a statement. "All the three arrested have been remanded into judicial custody up to 15th April 2009." CBI did not provide the names of the individuals arrested.

Satyam shares plummeted in early January, after chairman Ramalinga Raju admitted falsifying the company's cash position by as much as $1 billion while overstating quarterly earnings and revenue by up to 28%. Satyam may also have faked employee numbers and other data. Raju tendered his resignation and has been arrested and jailed.

Raju is now in the custody of the CBI. Other Satyam officers, and two employees of PricewaterhouseCoopers India, also were originally detained in connection with the case.

Satyam has placed itself on the block in hopes of finding a buyer with pockets deep enough to see it through the current crisis. The company has said it hopes to complete the sale process by April 30. Interested bidders include iGate, Larsen & Toubro, and Spice Group.

A report Tuesday in India's Business Standard newspaper said tech giant IBM had pulled out of the running for fear of lawsuits by Satyam investors defrauded by Raju and his accomplices. Satyam recently warned potential buyers that it has no way of estimating the impact of numerous class-action suits filed against the company in the wake of the accounting scandal.

"Neither the company nor its counsel will be in a position to provide an estimate of the potential claim values or settlement values in such class-action suits," Satyam said in a document filed with the U.S. Securities and Exchange Commission. "The bidder may undertake its own independent assessment based on publicly available information."

Increasingly nervous Satyam customers are looking for alternatives in case the scandal-scarred outsourcer is unable to restore internal stability or find a buyer.

Last month, the United Nations said it planned to terminate its contracts with Satyam and bar the outsourcer from bidding on future work.

Another Satyam customer to eye alternatives is Selective Insurance Co., the 47th largest property and casualty insurance company in the United States. Selective has outsourced about a quarter of its IT staffing requirements to Satyam, but it may be looking for other arrangements in light of Satyam's woes, according to a document the company filed with the SEC.

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