December 24, 2008 1:09:50 am
Satyam Computer Services Ltd was barred from business with the World Bank for eight years, dealing a setback to the company just a week after it dropped a deal that upset investors.
Satyam’s shares have tumbled 28 per cent since it said last week it would pay $1.6 billion for two infrastructure firms in which the management held stakes and then quickly dropped the plan.
The stock shed a further 13.6 per cent on Tuesday to its lowest in more than four-and-a-half years on a media report, later confirmed, that it had been declared ineligible for direct contracts with the World Bank from September.
The World Bank said in a statement its decision followed a temporary suspension in February.
Satyam was declared ineligible for contracts for providing improper benefits to Bank staff and for failing to maintain documentation to support fees charged for its subcontractors, it said.
Reacting to reports in the US media on charges of data theft, a company spokesperson said that they were aware of the reports but it was the company’s policy not to comment on client relations. “We have seen the reports. Satyam has a policy not to comment on or discuss client relations,” a spokesperson said today.
A Fox News report said Satyam was straying badly across the bank’s ethical warning lines. Quoting sources, the report said that one of the worst breaches apparently occurred last April in the network of the bank’s super-sensitive treasury unit. “…bank investigators had discovered that spy software had been covertly installed on workstations inside the bank’s Washington headquarters allegedly by one or more contractors from Satyam,” Fox News said. According to the report, Robert Zoellick reportedly told his deputies, “I want them off the premises now.” The report pointed out that A World Bank official denied that Satyam was behind any of the bank’s security breaches: “I am not in a position to tell you,” adding that “we’re confident” it wasn’t Satyam.
The company may try to placate shareholders through a share buyback, which is to be considered at a board meeting early next week, but analysts said investors would be nervous that the World Bank ban might put off other customers.
(With inputs from Reuters, PTI)
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