Market regulator Securities and Exchange Board of India (Sebi) has barred Satyam Computer?s founder and former chairman B Ramalinga Raju and four others from capital markets for 14 years, and imposed a fine to disgorge the wrongful gains pertaining to the fraud of 2009.
Sebi also told Raju and four others to pay a fine of R1,849 crore at 12% interest per annum within 45 days. Others facing Sebi?s ban include Raju’s brother B Rama Raju (then managing director of Satyam), Vadlamani Srinivas (ex-CFO), G Ramakrishna (ex-vice president) and VS Prabhakara Gupta (ex-head of internal audit).
?No person can be allowed unjust enrichment by way of wrongful gain made on account of fraudulent, manipulative and unfair activities and/or insider trading as found… therefore, in exercise of the powers under the Sebi Act, 1992, I direct the noticees to disgorge the wrongful gain made by them from their contraventions,? said Rajeev Kumar Agarwal, whole-time director of Sebi said in an order passed on Tuesday. The regulator also said that the ?financial frauds as found in this case are inimical to the interests of the investors in securities and endanger the market integrity?.
On January 7, 2009, then chairman of Satyam Computer Raju had sent an email to Sebi, wherein he admitted and confessed to inflating the cash and bank balances of the company, besides understating liabilities and other financial misstatements. His letter to the board said he tried to sell the two promoter-related firms to Satyam in a final attempt to plug ?fictitious? cash on the company’s balance sheet. Soon after the fraud came to light, Raju was arrested for a massive accounting fraud but was granted bail in November 2011.
After the fraud came to the light, the government had ordered an auction for sale of the company in the interest of investors and employees of what was known at that time as the country’s fourth largest IT firm.
The company was acquired by Tech Mahindra, and renamed as Mahindra Satyam and eventually it was merged with Tech Mahindra.
According to Sebi, Raju brothers made ‘unlawful gains’ to the tune of R543.93 crore from sale of shares and R1,258.88 crore by way of pledging of some shares. Besides, Srinivas, Ramakrishna and Gupta have made ‘unlawful gains’ worth R29.5 crore, R11.5 crore and R5.12 crore, respectively, through sale of shares. Sebi said the actual financial results remained within knowledge and possession of them but the false and misleading financial results were published.
The information about actual periodical financial results of Satyam, therefore, remained ‘unpublished price sensitive information’ (UPSI) during the relevant time.
