After an awful 2008 which showed India a severe economic slowdown, fleeing foreign investors and the subsequent crash in the stocks markets and falling realstates. Every body was expecting 2009 would bring some respite to their losses. At least that is what I was hoping. Well, as if that wasn't enough, the first week of 2009 has witness India’s biggest corporate fraud.

Event which is likely to leave a deep long lasting scar on corporate management practices in India, Ramalinga Raju, the controversial Chairman of Satyam, one of India’s largest IT services dropped the biggest bomb, owning responsibility of a fraud running into billions of rupees. The company’s balance sheet, it is believed, has in reality just 6% of the total Rs 54 bn that it is reported to have. In other words, funds totaling Rs 50 bn are non-existent.

In a confession letter sent to the stock exchanges, Mr. Raju wrote, "Every attempt to eliminate the (balance sheet) gap failed. As the promoters held a small percentage of equity, the concern was that poor performance would result in a takeover, thereby exposing the gap. It was like riding a tiger, not knowing how to get off without being eaten."

Well if you think, this can't get any worse, well then check this out -- As per Economic Times, even the employee numbers on Satyam’s books were inflated! Yes you read that right...even the employee numbers were inflated. The company reportedly did it to siphon off funds in the name of non-existent employees. " The figure of 52,865 associates could actually be a much smaller number, with the additional numbers used for other purposes,"

And where does the problem lie? The Economist report continues - "India’s financial-reporting standards are high, its principal regulator, the Securities and Exchange Board of India, is independent of the government, and its business press is enthusiastic. But enforcement is weak, loopholes large, and shareholder activism is lackluster. There is virtually no voting by poll at AGMs, and meetings are often held in remote locations."

If Mr. Raju’s mail is to be believed, 95% of the cash on the books was simply not there. Come to think of, what were the auditors at Price Waterhouse doing? According to one mail i recived, we can think of 3 possibilities: 1) The cash was there. The auditors had verified it. Mr. Raju has siphoned it off later and his mail is a lie. 2) The cash was not there. The auditors were hand in glove in the fraud (think Arthur Anderson & Enron). 3) The cash was not there. The auditors were asleep at the security gate.

It is just like Warren Buffett stated-"We are suspicious of those CEOs who regularly claim they do know the future - and we become downright incredulous if they consistently reach their declared targets. Managers that always promise to "make the numbers" will at some point be tempted to make up the numbers."

Talk about bad times- the dilemma that the victims of the frauds have been facing, for no fault of theirs’. Take the case of employees of Satyam Computers. It is said that they won't get paid for january, even banks are not willing to come to their rescue. Employees of the beleaguered company are now finding it difficult to get personal loans or pay back equated monthly installments. Even their credit card limits have been reduced by as much as 80% by banks that become wary of potential NPAs (non performing assets), given the severe cash crunch at Satyam.

To add to the crisis, the poor job scenario in the Indian IT industry that has been facing the heat of the global economic meltdown offers very little recourse to the employees of Satyam.

The Satyam scandal wore heavy on the Indian markets during the latter part of the holiday-shortened week. Not only India, but most equity markets around the world had their fair share of negative news to keep them void of any gains. However, for India, the obscenity of the fraud at Satyam rocked investor confidence, and became a big drag on the markets’ performance this week. India was the biggest loser among key Asian markets, falling almost 5.5%.