Will Ramalinga Raju pay the price for fraud of the century?

As head of a software firm, Satyam Computers, he put his company on a stratosphere within a very short period of time, expending its operations to  66 countries and boasting of an employee strength of around 45,000 with a turnover of a billions dollars. But until a major scam hit his company in 2008, nobody suspected that the suave and soft spoken Raju could turn out to be a man of criminal brain, who would crush the corporate credibility of Indian companies in one blow at a time when the FDI and other investments were pouring into India.

It all began with Satyam Computers announcing on December 16, 2008 that it was buying a 100 per cent stake in two companies owned by Ramalinga Raju’s sons -- Mytas Properties and Mytas Infra -- for a consideration of $1.6 billion. It was a proposal which came in for severe criticism from investors and analysts who smelt a rat and dubbed it as one of the worst cases of the failure of corporate governance in the country.

The very next day, on December 17, under tremendous pressure from the financial market, Satyam did a U-turn and 12 hours later, the deal was called off. But the damage had already been done and the company’s shares were pounded on the bourses and it lost $2 billion on the New York Stock Exchange.

Three weeks later, on January 9, 2009, Ramalinga Raju shocked the country by admitting to a Rs 7,800-crore fraud and how he had systematically siphoned off the money from Satyam. It was a confession which he was to retract later, but the CBI which had taken up the case, arrested him along with his brother and managing director of the company, B Rama Raju. The police slapped them with cases on charges of criminal conspiracy, cheating, forgery, misappropriation of funds and criminal breach of trust.

For over two years now, the cases are being fought in the CBI designated court and the Andhra Pradesh high court, with the end no where in sight. Meanwhile, last week on November 5, the Supreme Court ordered the release on bail of Ramalinga Raju, Rama Raju and V Srinivas, the former chief financial officer of the company. The next day, the Raju brothers and Srinivas, walked out of the Chanchalaguda prison in Hyderabad.

The software industry welcomed the Satyam founder’s release on bail, but the legal circles said it had further reduced the chances of speedy resolution of the case. “Even in judicial custody Raju had stalled the trial for over six months on health grounds till November 2010 after the CBI filed its second chargesheet. Imagine what his aides can do now? They will try every trick to ensure that the trial takes longer,” said a member of the AP Bar association.

On August 16 last year, when the trials began in real earnest Ramalinga Raju retracted his confession in the trial court by responding in the negative to a questionnaire sent by the court to the state-run NIMS, where he was being treated for hepatitis C. The burden of proof for Raju’s fraud now rests with the CBI. Proceedings have been stalled as Raju, undergoing treatment for a liver infection, has not been appearing in court since September.

The Supreme Court had directed that the trial be completed before July 2011 while cancelling the bail granted to Raju. The CBI had submitted a detailed schedule to the court for the trial.

But as the delays continued, the enormity of the fraud and complexities involved became apparent. CBI has now submitted a plea before the apex court seeking permission to reduce the number of eyewitnesses and documents to be examined. There were 697 witnesses and 3,057 documents to be examined in the three chargesheets filed by CBI so far, but it later reduced the number of witnesses to 226 to speed up the trial as directed by the Supreme Court.

Estimates of fraud

J L Negi, general manager, RBI, who was on a deputation to the CBI to assist the agency in the case, has estimated that the dubious deals that Ramalinga Raju had indulged in had resulted in an illegal gain of Rs 2,743 crore for the company’s promoters and Raju’s family, while the total loss suffered by the banks and investors amounted to Rs 14,162 crore.

The CBI and other agencies have been screening a huge amount of land and other properties owned by Raju and his family members and according to one report, the CBI is now gearing up to attach 425 properties spread over 1,224 acres acquired by Raju through 31 front companies.

These properties are spread out in Hyderabad, Visakhapatnam, Chennai, Bangalore and Nagpur. Incidentally, these 425 properties are in addition to the 444 properties spread over 4533 acres already attached by the Enforcement Directorate (ED) under the Prevention of Money Laundering Act allegedly  worth Rs 2,000. Enforcement Directorate (ED) has also filed ECIR in the CBI  designated court in Hyderabad.

The CBI Investigators said that Ramalinga Raju and his family were also guilty of skimming Rs 2,743 crore through tax returns and double book keeping.  Between 2003 to 2008 the CBI unearthed that the Satyam operators had created 7,561 bogus invoices. The Ramalinga Raju gang had created companies in the name of Mobitel, Cell net, E-care, Sinoni, North-C, Auto-Tech, Hargreaves with fake addresses.

According to legal experts, Raju may face up to 10 years in jail if convicted on charges of conspiracy, cheating and forgery. Others including his elder brother Rama Raju could go for lesser periods including waiver on age concerns. But there are worries that now Ramalinga Raju is out on bail, he would be able to influence the 250 witnesses, who are mostly former employees of Satyam.

It all depends on how strong a case the CBI can present to the court and how quickly the courts can wrap it all up to bring the Independent India’s biggest financial fraud to a ‘just’ conclusion.