Satyam for a song

The response to SEBI new watered down take over code for troubled company seems lukewarm. Yes. I am talking Satyam. Partically SEBI is removed the biggest stumbling block and a potential
disaster for prospectiv suitors.

But SEBI was smart. The riders are simple & cannot be cited as precedent for future hostile attempts. The exemption for open public offer applies only for listed companies which have a goverment board superceding the original board of directors. ( Maytas board is not superceded and
both CLB & SEBI refused to do so. BTW Maytas is nothing but S-A-T-Y-A-M spelt backwards )

Still there are very few takers. The pre condition that bidders should have a min networth of $ 150 m prunes the list substantially. The present financial market condition is not condusive to raising the required funds. The market conditions in US , EU and in general in the west and Japan particularly in the BIFS segment is not very promising. Nothing seems work in favour of Satyam and that a bonanza for the final winner.
The billion dollar question ofcourse is what is the contigent liability for the numerous class action suits pending in US

Who better to investigate Insider Trading

Some things often are beyond my comprehension.

The AP police are making a mess of the Satyam investigation ( see my post Satyam Insider Trading dated 31 Jan 09 )

Its not clear to me if the cops are not fully aware of what Insider Trading is or are they just pretending to mislead the press and the public.

What is even more confounding is what the courts are not allowing SEBI the market regulator to interrogate the Rajus. This is a multi dimensional scam and every government agency has its needs and rights to investigate and prosecute.

Agreed that certain provisions of law does not permit a person under judicial custody to be investigated by all & sundry. But SEBI is not exactly all & sundry. They have a very important role of regulating the market and investigating and prosecuting offenders. This is precisely what they intent doing the Satyam and Raju. But then why .....

Political Ponzi scheme

Bernard Madoff is accused of running a $ 50 billion ponzi scheme which failed like a ponzi scheme is expected to fail. Duly arrested and prosecuted. Well house arrested to be precise. ( He still lives in the comforts of his million dollar apartment in mid town Manhattan over looking the Central Part. Lucky you.)
He conned financially savvy milliners and no middle class guy is allowed anywhere near him. People were ready to invest by the millions for the very sight of him in his Miami Beach pent house or the Country Club there which he regularly patronised.
All these luxuries not withstanding he is done for life in a prison. Sooner rather than later.
But then for the financially un-savvy investor what is a Ponzi Scheme Wikipedia defines it as

fraudulent investment operation that pays returns to investors from their own money or money paid by subsequent investors rather than from profit See full page here

Wikipedia goes on to add

The Ponzi scheme usually offers abnormally high short-term returns in order to entice new investors. The perpetuation of the high returns that a Ponzi scheme advertises and pays requires an ever-increasing flow of money from investors in order to keep the scheme going. Go to Wikipedia page

Now what was the housing boom in United States ? An official Ponzi scheme by first Ronald Reagan and later by the Bush administration. Very simple. Give tax breaks on housing mortgages so people will buy up houses so there will be demand for housing so housing prices will go up further reduce the interest rates and make funds easily available so more people will buy up houses so housing prices will go up and further relax rules and flipping properties becomes the norm so more people will get into this speculative spiral so prices will go up further and don't forget Alan. Yes Alan Greenspan to turn a blind eye so there will be no regulatory restrictions so the boom will boom even more so ... so.... so. Till such time the scheme collapses. Like a Ponzi scheme ? Very much. See what Wikipedia has to say about collapse of the

The system is destined to collapse because the earnings, if any, are less than the payments. Usually, the scheme is interrupted by legal authorities before it collapses because a Ponzi scheme is suspected or because the promoter is selling unregistered securities. As more investors become involved, the likelihood of the scheme coming to the attention of authorities increases. Its Here

Here the authorities were the perpetrators of the scheme so it went on and on for so long the world nearly come to an end in Dec 08. Now the governments the world over are pouring hundreds of billions of dollars in a seemingly bottomless pit called the global economy with even a ray of hope nowhere in sight.
If looks like a Ponzi, walks like a Ponzi and quacks like a Ponzi then chances are its a Ponzi scheme. Except that George W Bush got away scot free.

God Bless the Political Ponzi Schemer.

Lessons from Satyam for India Inc by Kiran Mazumdar Shaw

Ms Shaw has written a great essay on the fiasco. Well thought out and itemized. The essay is available here But nothing new there.
She has very thoughtfully listed the systems required and the procedure to be followed by the corporates for great governance. But then Satyam had that and more. I has consistently met or exceeded all compliance requirements. It was awarded the World Council of Corporate Governance Golden Peacock Award not once but twice. But then the truth is grossly different. The award was mentioned in all the media after the fraud was disclosed. The Council is not at fault. The award is given on the basis of self declarations given by the CEO , board of directors & other C-Suite occupants.
This is a fraud of grand scale. Executed to such perfection for many years and hand in glove with the top management teams in finance, accounts , marketing and above all with one of the top 5 audit firms in the world.
Just before the disclosure by Mr Ramalinga Raju did any body have a clue of the underlying problems in Satyam. Not on earth
When a gang of more than 2 dozen very senior executives could run this scandal over 4 years with nobody deduction how do you expect a London based non statutory body to investigate the fraud. ISO gives the standards and an independent ISO auditor certifies a certain company has all the systems procedures and controls to follow the standard. Neither ISO or the auditor is responsible for the end product. Same thing here.
Satyam was stripped of the awards on 7 th Jan 09 See Here
I would say to strip off the award means WCfCG.net accepts its error. Instead the award should have been expunges or its equivalent to absolve itself of its responsibility to such fraudulent practises. Now is WCfCG going to audit all the books of future awardees ? Practical ? Or is WCfCG competent to do this.

Well. Back to Kiran's essay

She writes about all the right things good corporate governance is about. Well that is exactly what Satyam said it did. The guidelines are about how to run a honest company. Here we have a team as a whole fraudulent by thought and action. No amount of guidelines going to help if a guy and his team are hell bent on cheating.

At best lessons India Inc can learn are not to commit fraud. And if committed don't pursue it till you get caught. Anything else you meant Kiran ?