Agencies nail fund diversion at Satyam

CRORES DIVERTED TO MAYTAS, FRONT COS

INVESTIGATING agencies probing the Satyam Computer Services scam have proof that money was diverted into Maytas Infra, Maytas Properties and various front companies linked to B Ramalinga Raju, the disgraced promoter of the software firm, and his family members.
    While thousands of crores could have found their way out of the software firm's books, key agencies, including the Serious Frauds Investigation Office (SFIO), will soon assess the quantum of diversion, based on records seized from all these firms.
    SFIO's interrogation of Raju, his brother Rama Raju and former Satyam CFO Vadlamani Srinivas on Saturday and two auditors of Price Waterhouse on Sunday could provide clues on the modus operandi.
    The investigating agency is understood to have questioned Raju and his brother Rama Raju on the mystery of the missing Rs 1,700 crore from the company's account in an overseas branch of a state-owned bank.
    Raju's elder son Teja Raju runs Maytas Infra while the younger son, Rama Raju Jr, runs Maytas Properties. Raju and his family also floated 350-odd front companies, mainly for land deals.
    "Investigations show that the intercorporate loans and investments made by Maytas Infrastructure and Maytas Properties far outstripped the limits laid down under the Companies Act, raising suspicion on diversion of funds to benefit the promoters' companies," said an official involved in the investigation.
    Under the Companies Act, a firm needs shareholders' approval to make any loan or investment, give a guarantee or provide security beyond 60% of its paidup capital and free reserves, or 100% of its free reserves, whichever is higher.
    Maytas Properties had a paid-up capital of only Rs 5 lakh. However, in 2007-08, the firm made investments to the tune of Rs 90 crore and had loans and advances totalling Rs 419.63 crore. The company also received funds through unsecured loans for about Rs 600 crore. It used the borrowed funds for inter-corporate investments and loans.
    Besides, the firm made investments in preference shares and debentures at an interest rate lower than the prevailing bank rate, violating provisions of the Companies Act. "Various balance sheets of the subsidiaries of Maytas Properties show they disclosed high amounts of share premium received from the holding company without any corresponding cash and bank balances. Land and property were sold at inflated prices without corresponding amounts in cash and bank accounts, thus increasing the reserves and profits to artificially show high net worth," said the official.
    Similarly, Maytas Infra had several transactions with group companies in FY08, in violation of the Companies Act. FOCUS OF PROBE
Ramalinga Raju's modus operandi of falsifying Satyam's accounts Involvement of directors, managers and officers of the company in falsification Involvement of other entities (Maytas Infra, Maytas Properties, 350-odd front cos) in the scam Siphoning off of funds from Satyam; diversion of Rs 1,700 cr from an overseas bank account Role of internal and statutory auditors Maytas was last straw
    AGAINST a paid-up capital of Rs 301.42 crore, the company made investments of over Rs 256 crore and loans and advances to group companies of around Rs 102 crore.
    Satyam, too, would have violated the norms had it acquired Maytas Infra and Maytas Properties. The cost of acquisition was put at Rs 7,920 crore, though Satyam could make investments only up to Rs 2,000 crore based on its accounts for FY08. "The aborted Maytas deal was the last attempt to fill up the fictitious assets with the real ones," Raju had said in his confessional statement on January 7. Investigating agencies are baffled as several front companies have asked Satyam to repay Rs 1,230 crore.