Tuesday, December 09, 2014

Satyam case judgement

The judgement in the Satyam case has been poorly reported in the media. Two things are noteworthy.

First, the judgement in a trial court in Hyderabad relates to six relatively minor offences for which charges had been brought by the Serious Fraud Investigation Office. The  main trial is going on in a CBI court and the judgement in that trial is expected towards the end of the month. The fact that B Ramalinga Raju got six months in jail in the trial court should not give the impression yet that he's getting off lightly in the case.

Secondly, the independent directors haven't been let off . HBS prof Krishna Palepu has been fined Rs 2.66 crore. The other independent directors have all been fined Rs 20,000. Unfortunately, the papers don't tell us what the fine is for and why Palepu has attracted such a big fine.

The BS report suggests that Palepu was paid professional charges without obtaining the opinion from the central government. Does this pertain to the consulting fee that was paid to him? It's not clear.

But the message for independent directors is an ominous one. It has often been contended that the independent directors on the Satyam board could not have possibly known about the accounting fraud. Nevertheless, the court has imposed a fine. 

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