Class action suit against PwC for 'recklessness' in Satyam fraud

In a new class action lawsuit over the Satyam scandal, global audit major PwC, along with its Indian and international units, has been charged with having "recklessly disregarded" a multi-year massive fraud by the former management of Satyam.

The lawsuit has been filed in the US District Court, Southern District of New York, by Pomerantz Haudek Block Grossman & Gross LLP law firm against Indian IT firm Satyam, its former Chairman B Ramalinga Raju, his brother B Rama Raju and Satyam's outside auditors PricewaterhouseCoopers , Price Waterhouse and Pricewaterhouse Coopers International.

The suit was filed on behalf of purchasers of the American depository receipts of Satyam between January 6, 2004 through January 6, 2009.

"In addition to allegations of fraud against Satyam and the officer defendants, the complaint alleges that PwC was aware of, or recklessly disregarded, a multi-year massive fraud by Satyam management to overstate the company's earnings," the law firm said in a statement.

"The case further alleges that PwC ignored red flags that should have alerted it to the fraud, and moreover, failed to perform its audits in accordance with the requisite accounting principles," it added.

Price Waterhouse, the Indian unit of the global audit major, has been maintaining that it followed all the standard accounting principles while auditing the books of Satyam Computer.

However, it also said that its auditing on Satyam could be construed invalid if the statements made by Raju in his admission letter on January 7 about the fraud were correct.

Two partners of PwC have been arrested in India in connection with their audits of Satyam. Disclosure of the stunning fraud at Satyam materially impacted the price of the company's ADRs. Trading in the company's ADRs was briefly halted after the fraud was revealed, and the ADRs are now currently trading just below $two, a precipitous drop from the company's 52-week high of $29.84, the law firm said.

SRSR Holdings GM granted bail
A Hyderabad court today granted bail to SRSR Holdings' (promoter company of Satyam founder B Ramalinga Raju) General Manager Gopalakrishnam Raju on two sureties of Rs 25,000 each.

The court ordered him to surrender his passport and cooperate with the probe. Raju (of SRSR) was in judicial remand till February 7. The judge also extended the judicial custody of Price Waterhouse partners and auditors S Gopalakrishnan and Talluri Srinivas till Saturday.