Turnip: “Welcome to the Crapola News Network. In our top, in our top, in our top story today, the Foreign Affairs Minister, Mr. Dukhdardjee, said India had evidence of Pakistan being responsible for the Satyam fraud, and called upon Pakistan to behave responsibly and end financial terrorism. Apart from some e-mails to Satyam that originated in Pakistan, other evidence – available exclusively on Crapola – included the fact that there was an entity called PWC in Pakistan as well, which obviously masterminded, aided and abetted this fraud. “We are prepared for any eventuality and have kept all our options open” Mr. Dukhdardjee said, adding that he had spoken to his counterparts in the USA and the UK and pleaded with them to ask Pakistan to stop. “We are disappointed that after 25 years of requesting the USA to tell Pakistan not to trouble us, nothing has been done.” Taking a tough stand, he added, “Our patience is running out. A few more instances like Satyam, and there is a real possibility that we will consider serious action – for instance, multiple press-conferences like this on the same day.”

In view of the Sa-Sa-Satyam affair, security at other high-profile Indian companies has been strengthened. Special Personnel from SEBI, RBI, ICAI and the BSE have been rushed to the spot. The situation is believed to be tense, to be tense, to be tense but under control. The Prime Minister, Mr. MoanMoan Sing, in an impassioned speech to the nation – in which he blinked thrice, cleared his throat twice and actually looked away from the teleprompter on one occasion – said that the government condemned Pakistan’s complicity in this affair, and that they were ready to take the strongest possible measures to ensure that such scams do not come to light again.

Meanwhile, Affair-with-the-Minorities Minister, Mr. I. Wantolay, called the Satyam fraud a sinister attempt at deflecting attention from the Malegaon blasts, and hinted at right-wing Hindu involvement. Goohlayehum Yadav and Bummer Singh supported his theory and called for an, called for an, called for an impartial probe implicating the Hindu right.

Opposition Leader Turdvani called for tougher laws to ensure that there was no repetition of such incidents, though his demand might be infructuous. This demand was quickly supported by ordinary citizens, many of whom called for stricter legislation along the lines of the Fraud Unearthing and Corporate Knavery (Updated Significantly) Act, though saner commentators warned that such acts could only sc-sc-screw us,  the citizens. Charkha.”

Charkha: “Yes, indeed, Turnip. It is very goose-bumpy. The US and UK governments have not really responded to India’s entreaties and have asked India to point fingers only on the basis of incontrovertible proof. In response, the government has decided to plead harder with them.

In related developments, Pakistan has condemned the Satyam fraud, promised full co-operation, denied involvement and called for UN intervention in Kashmir to make sure the root causes of corporate fraud could be addressed. When we come back after the break, Aamir Khan, Katrina Kaif and Rakhi Sawant tell us what they think went wrong with Satyam. Don’t go away!”

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The Satyam fiasco has reached its conclusion. Ramalinga Raju has resigned after admitting to cooking his books for years. It seems that Satyam overstated revenues and profits financial year after financial year, and as on 30th September 2008 showed (non-existent) cash and bank-balances of Rs. 50,400 million and did not report liabilities to the extent of Rs. 12,300 million. News channels put the extent of the fraud at Rs. 70,000 million.

While Ramalinga Raju has stated he’s ready to face the laws of the land (sporting, isn’t he?), this raises some very interesting questions. Most board members were unaware, or so they claim, of this fraud. So what exactly is the role of the board? Or do most boards still buy whatever management tells them? And what about the stat auditors, PriceWaterhouseCoopers? What have they been doing all these years? They have signed off on the accounts. What about all the institutional investors in Satyam? Fidelity, Aberdeen and the lot? What kind of due diligence was done here? Of course, PWC is going to get most of the flak here, as all the other parties are going to claim that their decisions were based on the accounts certified by PWC.

Most Indian companies excel at creative accounting. So the scary part is that there may be many more Satyams waiting to happen. The magnitude of this fraud lies in the fact that this is not some small mom-and-pop store. Satyam is an index stock, and is also listed abroad. It’s part of the top 4 Indian IT companies. How is this going to impact investment in India in these already difficult times? Look at the list of people Satyam fooled. The BSE, the NSE, PWC, Investment banks….these were not naïve retail investors relying on TV recommendations. These were specialists. And that is what makes this so petrifying. Not because corporate governance, transparency and honest reporting are problem areas in the Indian corporate sector. We know they are. But this is terrifying because the checks and balances have failed miserably. At worst, the regulators, auditors and other agencies might have been in on the scam. At best, they are a bunch of incompetent idiots.

2009 has got off to a rocking start, hasn’t it?

PS: Check out Liju’s interesting post on how Satyam kept lying about the Maytas deal.

UPDATE: Here’s what Citigroup’s research arm has to say about the possible fallout of the Satyam episode.