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Former Satyam head accused of drawing wages of fake staff

The former chairman of Satyam Computer Services inflated the size of the outsourcing company’s workforce by nearly a quarter and siphoned off the wages of fake employees, Indian authorities have claimed.

Allegations from the public prosecutor in Hyderabad, southern India, are the first time the authorities have revealed the results of their investigations into India’s worst fraud, which came to light more than two weeks ago.

The public prosecutor’s arguments contradict a confession written by B. Ramalinga Raju, Satyam’s former chairman, and given to his board.

In the letter, Mr Raju said he had manipulated company accounts to dress up poor performance but had never stolen money.

Gangaraj Prasad, the public prosecutor of Andhra Pradesh state, told the Financial Times: “The number of employees at Satyam Computer stands at 40,000 and not 53,000 as claimed by the company.”

Mr Prasad alleged that the Satyam founder had used fictitious names to divert Rs200m ($4m) a month out of the company’s accounts “for his personal wealth”. It was not known where the money was invested.

The prosecutor’s arguments were presented in support of a police application to extend custody of Mr Raju for three days while investigations were carried out.

The judge agreed to grant the police another 24 hours until tonight.

Mr Raju’s defence team rejected the allegations and said he stood by the claims in the confession letter.

“The prosecutor lied in the court as all his allegations were not supported by facts,” said S. Bharat Kumar, head of the defence team.

Mr Prasad also alleged that police had found evidence of secret business dealings between Mr Raju and a land broker.

“This also suggests that hundreds of acres of land was bought using benami [false] accounts,” Mr Prasad said.

The prosecutor added that police had found that Satyam had forged documents from HDFC, an Indian private sector bank. The bank had confirmed that supposed certificates verifying that Satyam had deposits with HDFC were false, Mr Prasad said.

The court is expected to hear an application today from the Securities and Exchange Board of India, India’s stock market regulator, for permission to interrogate Mr Raju.

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Published: January 23 2009 02:00 | Last updated: January 23 2009 02:00

Source / courtesy: The Financial Times By Joe Leahy in Mumbai and Varun Sood in Hyderabad