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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.

The Securities and Exchange Board of India (SEBI) said Tuesday that Satyam founder Ramalinga Raju and his brother, Rama, with the help of the company’s chief financial officer and two others created fake orders and falsified other company records to make the business appear more profitable, enriching themselves in the process.

After the scandal, Satyam was acquired for $14 billion by the Mahindra Group in 2009. Last year it became Tech Mahindra.

The SEBI said Raju, pictured above, was “the chief orchestrator of the fraud” and that he was responsible for “deliberately conveying a false picture of Satyam Computers’ finances to the investing public and concerned authorities.”

It ordered Raju and his colleagues to repay $307 million in alleged gains connected to their shareholdings in Satyam at the time of the accounting irregularities, plus 12% annual interest since January 2009, lifting the total payment to about $500 million.

In a letter to the SEBI in 2009, Raju admitted inflating the company’s revenue and profits. But he said neither he nor his brother had “benefited in financial terms” from the altered results, the Wall Street Journal said Wednesday.

Raju and his brother have been on trial in Hyderabad for fraud and other criminal charges. The court has said it will deliver its verdict by the end of the month.

The former executives made roughly $300 million by selling Satyam shares and pledging them as collateral for loans during the time earnings were falsely inflated, the regulator said.


Julie DiMauro is the executive editor of FCPA Blog and can be reached here.

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