Seniors, FIs face probe for INSIDER TRADING

Could the Satyam brass be involved in India's biggest corporate fraud? Investigators think so after finding they encashed 3.6 lakh Esops in the Dec quarter,just as FIs sold shares

Gireesh Chandra Prasad NEW DELHI

    INVESTIGATORS of capital market regulator the Securities and Exchange Board of India (Sebi) and specialised probe agency Serious Fraud Investigation Office (SFIO) will now look into the sale of over 3.6 lakh Satyam shares by senior company executives ahead of founder B Ramalinga Raju's January 7 confession.
    An initial assessment by investigators shows that Satyam employees encashed these employee stock option (Esop) shares in the December quarter when the scrip was trading at Rs 264-150. Investigating agencies are baffled, as these deals were struck when the scrip was ruling far below its May peak of Rs 500. Soon after Mr Raju's confession, the price fell to an all-time low of Rs 11.50 before recovering to around Rs 50 currently.
    An investigator who didn't want to be named said these deals needed to be probed for insider trading as well as for these executives' possible involvement in India's worst corporate fraud. The scam, which broke out as a Rs 7,000-crore account fabrication, has now attained the dimensions of fraudulent diversion of funds, money laundering, foreign exchange manipulation, insider trading, criminal breach of trust, income-tax violation and roundtripping of ill-gotten wealth.
    Sebi and SFIO are also probing the sale of 4.3 crore shares by financial institutions. These shares were pledged by Ramalinga Raju and family as collateral for loans from these institutions. This also happened in the December quarter. Financial institutions say the share price had fallen below the loan amount and they had no option but to offload them.
    Investigators also said the Raju family corporatised its holding in Satyam under an entity called SRSR Holdings as early in September 2006. This entity subsequently pledged the shares with various financial institutions. This indicates that the diversion of funds and the gradual exiting of the founder and his family from the company were well thought out years ago, they said.
    gireesh.prasad@timesgroup.com