Indian outsourcer Satyam's founder guilty of accounting fraud, court rules

B. Ramalinga Raju confessed in 2009 that the company had overstated its revenue and profit for several years

The founder of Satyam Computer Services has been found guilty of a financial scam that brought the Hyderabad-based outsourcer to the verge of collapse before its rescue by a rival.

A special court in south India found B. Ramalinga Raju and nine others, including former executives of the company, guilty of several crimes for which they will be sentenced on Friday, according to local reports. Raju and some other key accused had previously spent about a year in judicial custody.

The company went into crisis in January 2009, when Raju disclosed that the company's revenue and profit had been inflated for several years.

The Indian government replaced the existing board with its own nominees charged with steering the company through the scandal. The government thus hoped to reassure customers, but a large number drifted away all the same, analysts said at the time.

Satyam also had to settle litigation and fraud charges, including with the U.S. Securities and Exchange Commission.

In an auction in April 2009 another Indian outsourcer, Tech Mahindra, acquired a dominant stake in the company through its subsidiary Venturbay Consultants. Satyam was eventually merged with Tech Mahindra in 2013, in a quest for operational efficiency and economies of scale. The turnaround has been profitable for Tech Mahindra: In the fourth quarter last year, it had profit of $129 million on revenue of US$924 million.

Raju was one of the poster boys of the Indian IT industry before the scandal, and much of the damage control after the financial crisis was focused on ensuring that other Indian outsourcers such as Infosys and Wipro were not affected by the scandal. The other firms were, however, not impacted and may have benefited for a while from business shifting to them from Satyam.

John Ribeiro covers outsourcing and general technology breaking news from India for The IDG News Service. Follow John on Twitter at @Johnribeiro. John's e-mail address is john_ribeiro@idg.com

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