Prosecutor Says Satyam Inflated Staff Headcount, Siphoned Money
JANUARY 22, 2009, 10:15 A.M. ET
By ERIC BELLMAN
online.wsj.com
HYDERABAD, India -- A prosecutor pursuing allegations of fraud at Satyam Computer Services Ltd. said Thursday the company has 13,000 fewer employees than it reported and that as many as 400 fake transactions had been uncovered in the investigation so far.
K. Ajay Kumar, an assistant prosecutor, told a criminal court in Hyderabad that Satyam, a major Indian outsourcer, has only about 40,000 employees instead of the 53,000 it claims. He said money in the form of salaries paid to fake employees had been siphoned from the company at regular intervals in installments of $4 million. He also said thousands of acres of land were bought with the diverted money.
The prosecutor's allegations were made in a court hearing over whether to extend by two days police custody of B. Ramalinga Raju, Satyam's disgraced former chairman, and his brother, B. Rama Raju, Satyam's former managing director.
A lawyer for both men denied the prosecutor's allegations, saying they were false, weren't included in documents filed with the court, and that there was no siphoning of money from the company. Both Raju brothers have been arrested on complaints of forgery, cheating and breach of trust.
Earlier this month, Ramalinga Raju sent a confession to Satyam's board in which he admitted to inflating Satyam's results, including the creation of a fictitious bank balance of more than $1 billion.
A Satyam spokeswoman said that the company is "cooperating fully" with authorities, but declined to comment further on the allegations because the matter is still under investigation.
—Niraj Sheth contributed to this article.
Write to Eric Bellman at eric.bellman@wsj.com
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