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Ramalinga Raju, chairman of Satyam Computer Services admits scandal

Ramalinga Raju, chairman of Satyam Computer Services of Hyderabad, admitted Wednesday that he had cooked the books at the back-office giant, and resigned, citing the “tremendous burden that I am carrying on my conscience.”

Head of Indian outsourcing giant admits $1bn fraud. In a letter to the board, Raju said he inflated the company’s balance sheet by $1.04 billion so that 94 percent of assets Satyam claimed were, in fact, fictitious.

We know that Shares in Satyam, which is listed on the New York Stock Exchange, collapsed from $9.35 to 93 cents until trading was halted indefinitely.

Unfortunately, this is yet another blow for India’s stock market, which was already headed in the wrong direction. The biggest Indian corporate scandal in memory threatens future foreign investment flows into Asia’s third-largest economy, already facing slowdown pangs.

“How did they manage to conceal a fraud of such magnitude even from the auditors?” is the only question…..

The scandal will also raise questions over how outsourcing companies are regulated and audited around the world.

The Hindustan Times says in an editorial that the scandal could taint the entire outsourcing industry.

The Satyam scandal is spurring concern that India’s corporate governance is inadequate.

The New York Times said Satyam works for more than one-third of the Fortune 500 companies. Satyam employs 53,000 people, among the 2 million Indians working in the country’s booming high-tech industry.

As executives at other Indian outsourcing companies nervously assess what impact the scandal will have on them, many industry observers now argue that the Satyam case will damage India’s reputation as a reliable provider of IT services. Because of the Satyam scandal, they say, Indian rivals will come under greater scrutiny by regulators, investors, and customers.

Doubts about the reliability of Indian outsourcers are especially important, since customers often allow the Indian companies access to sensitive systems. “This industry doesn’t just make widgets,” as we all know.