MUMBAI, January 11, 2009 (AFP) – A billion-dollar accounting scandal at one of India’s top outsourcing firms has left the government and financial regulators scrabbling to control the damage. Besides huge losses for investors, the scandal has seriously dented India Inc.’s reputation for strong corporate governance, often viewed as being a notch above its other Asian rival, China.
“The admission of fraud in financial affairs has created an adverse impression in the minds of trade, business and industry across the world,” the Indian government admitted in a letter to a business regulation body.
Satyam founder and chairman B. Ramalinga Raju had on Wednesday admitted his company’s accounts and assets had been falsified over a period of several years, with profits inflated to the tune of more than one billion dollars.
He was arrested late Friday and is now in jail pending trial, a dramatic fall from grace for a business leader who was one of the pioneers of India’s outsourcing boom and once the darling of international investment funds.
Satyam shares have gone into freefall, closing at 23.85 rupees on Friday compared with a value of around 180 rupees before the scandal broke.