B. Ramalinga Raju has confessed that a huge sum of money is missing from Satyam. According to a confession letter he wrote to the board this morning, somewhere between Rs 5,040 crore and Rs 7,136 crore (part of the letter is open to two interpretations) is missing from the company.
According to Raju, this sum has not been embezzled or misappropriated. Instead, it never existed. The company has been lying about its revenue and profitability for years. These lies have now become too big to sustain. As the letter puts it, “What started as a marginal gap between actual operating profits and the one reflected in the books of accounts continued to grow over the years. It has attained unmanageable proportions as the size of the company operations grew?”
As this point of time, nothing can be said about the real state of affairs. As it turns out, Raju and others at Satyam have been telling lies for years. For all we know, this letter may be just be another layer of lies that is hiding more than it reveals. Certainly, the letter can’t be taken at face value.
The biggest question that arises is actually not on the role of Raju, but that of the company’s auditors, PricewaterhouseCoopers. Interestingly, PricewaterhouseCoopers, which is a USD 28 billion (2008 revenues) professional services firm headquartered in New York, appears to have actually started attempts to divert attention from its role a few days ago. Three days ago, some newspaper reports started that PwC will ‘review its continuance with Satyam Computer’. However, few would be willing to believe that such a huge, multi-year scam could have taken place without complete co-operation and connivance of the auditor.