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Four months after the massive fraud at Satyam Computer Services threw corporate India into turmoil, markets here have practically declared the incident over. Satyam’s top managers gave detailed confessions of their crimes and were jailed; the board was fired; and the company was sold. Foreign investors are even flocking back to Indian stocks.
But Satyam’s independent auditors, two accountants from Price Waterhouse, who maintain their innocence, remain in prison. They, like Satyam’s managers who confessed, have been charged with multiple offenses, including dishonesty, cheating, falsification of accounts and using forged documents. On Monday, their seventh appeal for bail was denied.
In an interview this week in the prison’s dim, noisy, concrete visitor’s hall, the accountants said they had become scapegoats for an entire system that failed to catch years of wrongdoing at Satyam. ‘‘I’ve been 31 years in this profession, and I have never seen auditors being booked,’’ said Subramani Gopalakrishnan, one of the two jailed.
Price Waterhouse audited Satyam’s books worldwide from 2001 until the company’s founder, B Ramalinga Raju confessed in January that he had fabricated more than $1 billion in cash on the company’s balance sheet. Subsequent investigations revealed falsified bank balances, depository receipts, invoices and even bank letterhead used to bolster the fake accounts. Raju and some of the other top managers are also in Hyderabad’s prison, but in separate quarters.
Price Waterhouse (PW) is under pressure to prove that their auditors were not complicit in any way. But a preliminary report from CBI alleges that the auditors ‘‘consciously’’ overlooked accounting irregularities and ‘‘knowingly’’ certified inflated and falsified data.
In a petition for bail, it said that the government has ‘‘no material or iota of evidence to even remotely suggest’’ that the partners ‘‘had any knowledge’’ that Satyam documents were falsified. Harsh Bhal, a spokesman for CBI said that granting bail in a case was at “the discretion of the court based on facts of the case.” In this case, the chargesheet “clearly” spelled out the role of the auditors.
Other partners at PW say that they believe Satyam’s auditors are not guilty of any conspiracy. ‘‘If they had been involved, we would have taken them out and shot them ourselves,’’ said one partner who has reviewed the jailed partners’ Satyam audits.
Raju’s ‘‘carefully crafted image’’ and political connections fooled the company’s board, India’s regulators and everyone else, Gopalakrishnan said from prison. In retrospect, the only thing he might have done differently, he said, would be to be more aware of the pressure on Indian outsourcing companies such as Satyam to grow, and rely less on their employees to provide copies of the company’s bank balances.
The other PW partner, Srinivas Talluri, a youthful 48-year-old with wire-rimmed glasses, is trying to maintain his professional mien behind bars. In the interview, his hair was neatly brushed, he carried a notepad and a plastic water bottle and his T-shirt was so smooth it seemed ironed. He recently offered to check the accounts at the prison’s canteen, just to keep his mind sharp. ‘‘The whole world believes that preventing and detecting fraud is my responsibility,’’ he yelled through the wire fence. But the responsibility belongs to everyone from the company’s board and audit committee to regulators to even the government’s income tax department.
Accounting experts say that while authorities may be treating the PW partners harshly in this situation, making an example of them may prevent more serious repercussions for the country’s economy and even the audit firm itself.
Hari Kumar contributed reporting from New Delhi
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