Satyam CEO and MD arrested

The chairman of Satyam was arrested by police in India yesterday, after admitting to falsifying one billion dollars of assets and cash in company accounts.

Ramalinga Raju, who resigned from the company on Wednesday, and his brother B Rama Raju, managing director of Satyam, are charged with criminal conspiracy, forgery, criminal breach of trust, cheating, and falsification of records, and face jail terms of up to ten years and fines of up to 250m rupees ($5.2m).

The two were questioned throughout the night by Andhra Pradesh police investigating the financial irregularities that were revealed last week and now threaten the future of the IT services giant that counts General Electric and Nestle among its clients.

The Indian government has stepped in to disband the existing board of Satyam, and will appoint a new board within ten days, but has ruled out a takeover.

The government has also ordered an investigation into eight operating units of Satyam.

Satyam’s stock price fell by 85% in Friday trading on the National Stock Exchange, hitting its lowest point since March 1998.

New allegations about the company have also come to the surface, with the Hyderabad office of the Registrar of Companies reporting that bank statements for the company appear to have gone missing from three Satyam offices that it has raided.

Unnamed sources quoted in the Times of India also allege that company, which claims 53,000 associates, may also have inflated employee numbers to siphon off funds.

In Raju’s open letter of resignation to the board of Satyam and Indian authorities the CEO and founder stressed that only himself and his brother were aware of the irregularities, but attention has also turned to the company’s CFO, Srinivas Vadlamani, and the new interim CEO Ram Mynamapati, who both sold off large amounts of Satyam stock in early September. Vadlamani, who is believed to have real estate interests in Dubai, has been taken into custody, but not charged as of yet.

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