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Satyam Scandal Investigation

Updated on April 19, 2018
William Higgins profile image

Will is an accounting major at West Chester University. He is interested in accounting fraud investigations.


Satyam Scandal

On January 7th of 2009, an Enron sized scandal had surfaced. This time it was from company by the name of Satyam. Saytam is a computer services company, based out of India. At the peak of Satyam’s life, the company was one of India’s most aspiring company’s. However, the intentions of Satyam were no always sincere, and lead to multiple accounts of fraud. This fraud mostly came from the hands of its founder Ramalinga Raju, his two brothers, and seven other high-level executives in the company. They falsified sales revenues to trick their own investors and auditors, for selfish and greedy personal gain (Ruth David).

These high-level executives tricked their investors and auditors by cooking the books, and falsifying sales revenues. Ramalinga Raju, would create fake sales, and create clients in order to obtain more capital from investors. This extra capital would give these executives better dividends at the end of the year. These acquired dividends, would then go on to fuel their lavish life style. The better that their stock did, the more money from dividends would be paid out to them. Seeing the money that they were making, Ramalinga and others continued to falsify reports, for many years (EDU UPENN).


On January 7th of 2009, the members of the Saytam scandal had been exposed. Their greed finally came back to get them. However, the executives had been exposed internally, from a whistle blower. The whistle blower, was Ramalinga Raju, the man who started the scandal in the first place. Ramalinga, blew the whistle because he was in fear of being bought out from a takeover, and such move would expose him. In order to save himself, he blew the whistle, and wrote a letter about the scandal (Balachandran). Ramalinga, claims that as his habits grew larger, the gap between what the company was generating, and what was falsified, grew larger every day. With cash balance dues, becoming more difficult to falsify, the pressure became too much, and Ramalinga eventually folded. When the Scandal surface, the company’s assets were frozen, and their stock price plummeted. A lot of people lost a substantial amount of money that day (Balachandran).

Ramalinga and others got away with this fraud for many years, by manipulating certain accounting techniques. For instance, when they falsified their sales reports, they put all of their fake revenues in their accounts receivable balance. This makes it look like these sales were all credit sales, which do not have to be acquired right away. By tying this fake money up into accounts receivable, the company could post those fake sales report, without actually having to make any real money. The second step to faking their sales report, was to create a fake client base. By creating fake clients, Satyam could attach fake sales and invoices to a fake client. This would allow for them to fake sales revenue, without anyone being suspicious, or take a second look. Satyam also created fake employees to divert some of their fake earnings into labor cost. This tactic made their business look better than it actually was to investors. The Stock price of Satyam skyrocketed, making people with Saytam stock incredible gains. Auditors, failed to see what Satyam was doing, and some believe that they may have turned a blind eye (Ruth David).

After the news of Satyam broke out, the companied stocks plummeted eleven point nine rupees. The ten executives involved were bared from their positions, pending investigation. The auditing firm of Price Water House Cooper Affiliates was fined six million dollars by the SEC. Price Water House Copper Affiliates, were fined due to the failure of them not doing their jobs. The CID (Crime Investigation Department) after the scandal, discovered that Satyam had only 40,000 employees, apposed the 53,000 employees that they claim to be on their payroll (EDU UPENN). That is 13000 fake employees that accounted to 3 million dollars each month to payroll(Balachandran). However, that 3 million dollars was really just going into the pockets of Ramalinga and the other executives. On April 9th of 2015, Ramalinga Raju, and nine other executives were found guilty on falsifying accounts, tax returns, inflating company revenue and falsifying invoices. Ramalinga, and Nine others were all sentence to seven years in prison and penalized 55 million rupees each. That is $883,960 in us currency (EDU UPENN).


Ruth David. "Satyam Scandal Leaves No Place for India to Hide." Asiamoney(2009): Asiamoney, Feb, 2009. Web.

Balachandran, Sudhakar. “The Saytam Scandal.” Forbes, Forbes Magazine,


© 2018 William Higgins


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