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FCPA Blog Daily News

Entries in Satyam (5)

Wednesday
Apr132016

Bain Capital sues EY for faulty India accounting 

EY (the erstwhile Ernst & Young) is expected to pay Bain Capital about $35 million to settle claims that EY aided accounting fraud by an Indian clothing manufacturer in which Bain had invested.

Click to read more ...

Friday
Jul182014

Satyam founder ordered to disgorge $500 million for accounting fraud

India's securities regulator ordered the founder and other former executives of Satyam Computer Services Ltd. to disgorge more than $300 million in alleged gains and $200 million in interest for an accounting scandal that first surfaced in 2009.

Click to read more ...

Thursday
Jan292009

Off Topic And On

Our colleague, Paul Oki, sent this note from Nigeria a few days ago: Would it surprise you if I told you that even now it's not unusual to find cars with Obama campaign stickers plying our roads? Or that there were billboards in prominent places with "Obama for President" in some of our major cities? Or that on inauguration day several companies took out full page, color adverts in our national newspapers congratulating the American people? We all feel like proud Americans at this point in history -- I can't express it any better. He also sent the photo, above, showing the back of a passing car in Lagos.

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Does slapping a huge "crime tax" on public companies make sense? First Siemens for $800 million; now Halliburton, apparently, for almost $600 million. We're always in favor of more enforcement and less bribery. But corporations, as we've said, can't defend themselves against FCPA charges. And it's the powerless shareholders who ultimately pay. Imposing stiff compliance obligations on offending firms is a good idea. Prosecuting culpable executives is even better. But these mega-settlements -- is anyone else uncomfortable?

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The Wall Street Journal nailed it. "World Bank Omerta" is how it headlined the bank's indefensible practice of keeping quiet about suppliers guilty of corruption. A Journal editorial this week said, "[W]e are left to wonder whether the fraud at Satyam might have been discovered earlier if the World Bank had been more forthcoming about what it already knew to be a corruption-prone enterprise." We wonder -- will anyone try to sue the bank for breaching its duty to the public?

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There's precedent for ex-Gov. Blagojevich's bizarre road show earlier this week to New York City. Earl Long (Huey's younger brother) made a couple of similar trips when he was governor of Louisiana and under a few clouds of his own. In 1959, A. J. Liebling spent time with him and wrote about it in The Earl of Louisiana. The book opens with these wonderful words: "Southern political personalities, like sweet corn, travel badly. They lose flavor with every hundred yards away from the patch. By the time they reach New York, they are like Golden Bantam that has been trucked up from Texas -- stale and unprofitable. The consumer forgets that the corn tastes different where it grows."
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The Steelers by 7?

Enjoy the weekend.
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Tuesday
Jan202009

Satyam Boss Skimmed Cash, Paper Says

New allegations in the Satyam scandal could have major Foreign Corrupt Practices Act implications. A story in The New York Times by Heather Timmons on Sunday said Satyam Computer Services' founder and former chief, B. Ramalinga Raju, may have "skimmed huge amounts of cash from the company, rather than padding its books as he has claimed, a person involved in the investigation of the company said on Saturday."

Raju said in a confession to the company’s board two weeks ago that to inflate the balance sheet he forged bank records to show about $1 billion in fake deposits. But the person involved with the investigation in India, who hasn't been identified, says that Raju instead used 300 family-controlled companies to siphon as much as $1 billion in cash from Satyam.

If that's true, it's more likely money from the company went to officials in India and perhaps other countries. Satyam has government-linked customers for its outsourcing services around the globe. Payments to government officials or employees at government-linked enterprises could violate the FCPA's antibribery provisions.

Meanwhile, AFP reports that the Indian government has ordered a fraud investigation into Raju's "family-promoted Maytas Properties and Maytas Infrastructure, saying it suspected a link between these two companies and the scandal at Satyam." There have been other reports that Raju's family-owned companies might have received special preferences from authorities for infrastructure projects in India.

Raju is in an Indian jail pending a bail hearing on Thursday. He has said he didn't take any money from Satyam and never profited personally from his fraud.

U.S. authorities haven't commented yet on the case or any planned investigation.
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Tuesday
Jan132009

It's Another World At That Bank

Like everyone else, we're stunned by the news coming from the World Bank these days. First Satyam, then Wipro, and now Megasoft Consultants Ltd. All three Indian outsourcing companies have been banned from doing business with the Bank because they violated the fraud and corruption provisions of its procurement guidelines. Satyam's ban is eight years; Wipro's and Megasoft's are four years.

The three companies are obligated to comply with the Foreign Corrupt Practices Act. Satyam and Wipro are "issuers" and subject to the antibribery and accounting provisions; Megasoft Consultants is a "domestic concern" and subject to the antibribery provisions. Staffers at the World Bank are "foreign officials" under the FCPA, so giving or promising to give them anything of value to obtain or retain business with the Bank might be prohibited. All that is quite clear.

What's not clear at all is why the World Bank, an international public organization that advertises its global leadership in fighting corruption, didn't until now publish the names of companies and individuals that it has banned as suppliers. Despite the public's interest, the Bank only revealed the names on Sunday, after news groups and others protested the lack of transparency.

For its part, the Bank said its policy of keeping the bans secret "let it move more quickly," according to the Wall Street Journal. Now, though, it's listing 111 companies and individuals that it has banned, with some bans dating back to 1999. (Satyam and Wipro were banned in June 2007, and Megasoft in December 2007.) Most of the 111 bans are permanent, while others have a duration of up to 15 years.

So, will U.S. authorities investigate Satyam, Wipro, and Megasoft Consultants for violating the Foreign Corrupt Practices Act? What about the rest of the 111 companies and individuals named by the World Bank? And will staffers at the Bank itself ever be investigated by an outside agency for corruption as well?

How important is all this? Here's what the Bank has said about other people's corruption:

It undermines development by distorting the rule of law and weakening the institutional foundation on which economic growth depends.The harmful effects of corruption are especially severe on the poor, who are hardest hit by economic decline, are most reliant on the provision of public services, and are least capable of paying the extra costs associated with bribery, fraud, and the misappropriation of economic privileges. Corruption sabotages policies and programs that aim to reduce poverty, so attacking corruption is critical to the achievement of the Bank's overarching mission of poverty reduction.
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Our colleague, Russ Stamets, is working through these cases from an Indian perspective and contributed to this post. (Russ holds a Master of Business Laws from the National Law School of India in Bangalore, making him one of the few Western lawyers with an advanced Indian law degree.) We'll be hearing more from him in the days to come.
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