Friday, January 9, 2009

Sebi team reaches Satyam complex and PwC office in Hyderabad

There are reports that the Securities and Exchange Board of India has actually sent out a team to Hyderabad to look into the Satyam issue. CNBC-TV18's Vivek Law finds out what is the next likely plan of action.

As we had reported yesterday, the Sebi team has come here today. The interesting part is, while it is also in the Satyam Complex looking at the books, but I understand from government sources, that they are also at the PricewaterhouseCoopers’ (PwC) office. This is a very crucial piece of information, which means the regulator is not remaining confined to just looking at Satyam, but it is also looking at the role of the auditors through a physical inspection.

There has been a lot of debate whether auditors do come under the purview of Sebi. What I do understand is that the listing agreement is pretty sacrosanct in the sense that it puts a lot of burden on companies, as far as information to the stock exchanges, information to investors at large is concerned. And this has been an issue of not informing investors of what the truth really was and a large part of the owners at this point of time is lying with the auditors. Because the auditors for so many years did not know that so much amount of money was actually fictitious in the books. We have learnt that part of Sebi’s inspection is also to do with PricewaterHouseCooper (PwC). PwC’s office is in Jubliee Hill and the team has asked all people not to enter the area. We understand some senior officials of PwC have also come in from Delhi and this is now a serious multi-pronged effort on the ground by the regulator to find out what really went wrong.

We have been visiting Ramalinga Raju’s house to try and find out what is going on there; late last night there was eerie silence. Today again, there is pretty much no action whatsoever out there. The big question in Hyderabad is the fact where is he?

I have learned from Andhra Pradesh government sources that the government is considering, not necessarily the Andhra Pradesh government, it’s probably been in touch with the Central government as well, a full-fledged Central Bureau of Investigation (CBI) probe into this. As we have been reporting over the last couple of days, the local police establishment really hasn’t moved at all, to find out where Ramalinga Raju is, to interrogate him, to ask him what happened to this Rs 5,000 crore. His letter says that this money never existed that is not the theory that everybody is buying out at this point of time, because after all as we have been saying it was a real company, with real clients, with real revenues. So, it is not possible that this kind of 3% margin as he claims would have been even possible. This is a question which only Ramalinga Raju can answer that was this Rs 5,000 crore money, which was there, and has now vanished or was it never there in the first place as he has claimed in his letter.

No effort so far on the part of the enforcement authority, this is not something a Sebi can do. This is not something the Ministry of Corporate Affairs can do, this is something which a enforcement agency can do to find out where he is. There has been rumour mill all through yesterday that is he in Dubai, is he in the US––none of this is confirmed.

The senior police officials in Hyderabad do tell us that they are waiting for a complaint to be filed by Sebi. This defies all logic because this is a cognoscible offence; a cognoscible offence does not mean that the police cannot move till a complaint is issued. However, informally, some of them have even told us that they don’t even know how to handle such a case. This is not a police station case, this will have to be entrusted to an agency––an enforcement agency which understands the issue. The only agency of a national character, which can deal with something like this is the CBI. I have been told that the government is actively considering whether the CBI needs to be brought in to find out where exactly Mr. Raju is, to question him and to take this to its logical conclusion.

Thus, two real pieces of action the Securities market regulator is on the ground trying to find out are––what the books say? What is the kind of information that Satyam provided to PwC? What is the communication that went on between the two of them over the past quarters and perhaps even past few years? That is the first part. The second part is something seems to be moving in terms of the enforcement authorities into at least finding out, where Mr. Raju is.

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