CBI rechecking on Satyam defalcation evidence

The Central Bureau of Investigation (CBI) probe into the Satyam fraud is now focusing on the evidence of defalcation, which is missing in its chargesheet.

The charges made in its April 7 chargesheet were on cheating, forgery, falsification of records, suppression of evidence and criminal conspiracy.

The main job of tracing the chain of events done, the CBI team said it was now rechecking if the earlier Satyam management had indeed siphoned off funds. “If we find any evidence, we will file a supplementary chargesheet,” a CBI official in the probe team told Business Standard.

Meanwhile, the next hearing on the bail pleas of Ramalinga Raju, founder-chief of Satyam, his brother and next in command, Rama Raju, and ex-finance chief, Srinivas Vadlamani, has been set for Monday. The prosecution wanted time today to file its objections.

The CBI’s charge against the two Rajus includes allotment of stocks through Associate Stock Option Plan (ASOP) to the staff of the finance department “whose services were utilised in committing this fraud”. The investigating agency said Raju had flouted the procedure of allotment of ASOP by not convening the mandatory meetings in this regard.

On Price Waterhouse (PW) auditor Srinivas Talluri, the charge was that he had certified the accounts though there was wide variance between the confirmations he got from banks on fixed deposit receipts (FDRs) and the figures provided by the Satyam management. Despite getting original confirmations on the FDRs, Talluri, “in furtherance of the conspiracy, has chosen the forged bank confirmations provided by the accused,” the CBI said.

It said the head of Information Systems Audit of PW did an information technology general check for the first time in 2006-07, when around 180 deficiencies were found. This was communicated to the audit team, that IT systems in Satyam were subject to manipulation. It was also suggested that, given these deficiencies, substantial and elaborate examination of financials should be done.

In spite of this, the CBI said, PW auditor S Gopalakrishnan “deliberately did not make any extensive changes in the audit plan, which clearly establishes his motives and intentions in allowing the fraudulent practices to continue.”

In return, the CBI charged, the auditors were compensated through “exorbitant audit fee” of Rs 3.67 crore in 2006-07 and Rs 3.73 crore in 2007-08. In comparison, the audit fee paid by Wipro and Infosys in 2007-08 was Rs 1.1 crore and Rs 83 lakh, respectively.

The CBI said it was also examining if Ramalinga Raju and his aides had also inflated data on real expenditure. “They had inflated the company’s (stated) revenues by creating false invoices. It also has to be examined if they did a similar thing on the expenditure side,” the official said.

The probe revealed the two Rajus and ex-CFO Vadlamani published a falsified loading factor (utilisation of staff) in their published investor link. Loading factor denotes the actual percentage of employees having revenue generating projects on hand. A higher loading factor means the company is expanding its activities and increasing the customer base.

According to the investor link, between the second quarter of 2006-07 and that of 2008-09, the average offshore category (those working in India) loading factor was 74.88 per cent, whereas the actual head count loading factor was only 62.02 per cent. Similarly, the company was declaring a load factor of 96.71 per cent for the onsite category (those working in customer premises abroad), while it was actually 94.86 per cent.