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Guarding Against Corporate Fraud
The Indian outsourcing firm, Satyam Computer Services, which was the subject of the country’s biggest corporate fraud scandal in January 2009, has been hit with a tranche of supplementary charges. According to India’s Central Bureau of Investigation, the extent of the total fraud now stands at around $US3 billion. What the Bureau has revealed provides a salutary warning to any company in virtually any country that this could be happening right under your nose. If you suspect that might be the case, call in experienced professionals without delay. A wide variety of methods, ranging from detailed transactional analysis to computer forensics can be used by these experts to give you a clear picture of reality.
The original charges against Satyam’s former chairman revolved around his admission that he had misrepresented the company’s financial condition by inflating assets and understating debts. This included a fictitious cash balance of more than $US1 billion. He stunned India’s financial world when he made his confession. At the time, Satyam was rated as India’s fourth-largest information technology services group by revenue, with world-wide clients like General Motors, Nestlé and General Electric.
The new charges show that others at Satyam had been creating fake customer identities and generating fake invoices against them to boost revenue figures. They had also forged board resolutions and obtained unauthorised loans that were used to buy properties. Investigators have found over 1,000 such properties, purchased by the accused with the siphoned funds and involving 2,430 hectares of land as well as housing plots and building space.
Moreover, large sums of money were made from the sale of shares and from dividends received from inflated profits. A massive falsification of accounts also took place when a Hyderabad-based business process outsourcing company was bought out. All this has increased the original fraud by 40 per cent. The January scandal led to a government takeover and the eventual sale of a majority shareholding to another Indian firm, the mid-sized computer outsourcer, Tech Mahindra. This saved Satyam from imminent collapse. The company’s reputation, and the value of its shares, has suffered as a result, though the latter rebounded on the Bombay Stock Exchange when a senior executive announced in late November that Satyam was not expected to face any additional liability.
Many firms, in India or elsewhere, would not survive this sort of buffeting, which attests to the regard that both investors and customers have for Satyam and its technical skills.
Not all firms, of course, have fraud begin at the top and filter down into the executive ranks. It is far more common for it to thrive at a lower level. But if you have suspicions about what might be happening in the company you’re running – whether vague or substantial – you need to know what an experienced professional team can do to help you. They can scan millions of files and individual transactions involving your firm, and from anywhere in the world, to strip out and determine the pattern of what has occurred. They can help you make sense of the outcome, especially through visualisation and mapping, and present those results as indisputable evidence.
The best professionals are also aware of privacy issues and know when and how to coordinate their investigation with relevant police agencies as well as with your lawyers.
