January 9, 2012 7:19:03 pm
Satyam Computer Services,which has been acquired by Tech Mahindra,has filed a suit against its former Board of Directors,certain employees and the company’s audit firm Price Waterhouse in a Hyderabad Court seeking damages for perpetrating a fraud three years ago.
“The company filed a suit in the City Civil Court,Hyderabad,against the past Board of Directors,certain former employees and Price Waterhouse,the former statutory auditors,its affiliates and partners,seeking damages for inter-alia perpetrating fraud,breach of fiduciary responsibility,obligations and negligence in performance of duties,” Satyam,now Mahindra Satyam,said in a filing to the BSE.
In January 2009,Satyam founder Chairman B Ramalinga Raju had admitted to the accounting fraud at the IT firm.
Termed as India’s own Enron scam,the alleged Rs 14,000 crore scam cast shadow of doubt on the credibility of the Indian IT sector. The government soon stepped in and set up a new board,following which Tech Mahindra bought 46 per cent stake in Satyam through a formal public auction process.
The company was later July 2009 was rechristened as Mahindra Satyam.
“We believe the company suffered incredible loss….We suffered losses in customers,we suffered reputational loss,specific losses in terms of class action suit,what we had to pay to Upaid and the fines SEC imposed on us,” Mahindra Satyam Chairman Vineet Nayyar told a private news channel.
So,these are all significant damages and the company is seeking compensation,he added. Nayyar,however,did not disclose the amount of damages sought.
“We know the damages caused to us in terms of penalties,class action suits,penalties by SEC and Upaid…on top of loss of business,” Nayyar added.
Last year,Mahindra Satyam had agreed to pay USD 125 million (over Rs 587 crore) in an out-of-court settlement to end a bunch of class action suits filed in the US.
It had also agreed to pay USD 70 million in a legal settlement with British firm Upaid Systems. The Indian tax authorities have also made an income tax claim of about Rs 2,500 crore.
US regulator Securities Exchange Commission had in April,2011 imposed a penalty of USD 17.5 billion jointly on Satyam Computers,PriceWaterhouse India and affliates auditors for the accounts bungling that went undetected for several years.
Satyam agreed to pay a fine of USD 10 million towards settlement of charges of fraudulently “overstating the company’s revenue,income and cash balances by more than USD 1 billion over five years”.
SEC asked PriceWaterhouse India to pay USD 6 million in penalty for conducting “deficient audits of the company’s financial statements and enabling a massive accounting fraud to go undetected for several years”.
Other affiliates,Lovelock & Lewes and Price Waterhouse Bangalore agreed to pay the Public Company Accounting Oversight Board (PCAOB) a USD 1.5 million penalty for their violations of PCAOB rules and standards in relation to the Satyam audit engagement.
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