Ramalinga Raju on his way to the court hearing on Thursday (photo: The Hindu)
Ramalinga Raju, the founder of Satyam Computer Services, once the fourth-largest outsourcing firm in India, was sentenced to seven years in prison on Thursday after being found guilty in the country’s biggest accounting fraud case.
A court in Hyderabad, where Satyam was based, has pronounced Raju guilty of forging documents and falsifying accounts. He had admitted in January 2009 in a five-page letter that Satyam's profits had been overstated for years and assets falsified in a fraud allegedly worth over $1.5 billion, bringing the company to the brink of collapse.
Satyam, which is Sanskrit for "truth", was sold the same year to smaller rival Tech Mahindra in an auction. The company was later merged with Tech Mahindra, a unit of conglomerate Mahindra & Mahindra.
The court also found Raju's brother and ex-Satyam managing director, B. Rama Raju, as well as eight others guilty and sentenced them to seven years in prison, special public prosecutor K. Surender said.
All the accused in the case were charged with collaborating to inflate the company's revenue, falsifying accounts and income tax returns and fabricating invoices among other things, the prosecutor said. Raju and his brother were also fined Rs 5.5 crores ($883,960) each.
"The judgment given by the court will have far reaching consequences in checking corporate frauds and shall also act as a severe deterrent," said Rajesh Narain Gupta, managing partner at law firm SNG & Partners, told Reuters.
Raju was born into a family of farmers and graduated in management from Ohio University. He founded Satyam in 1987 and quickly became a poster boy of Indian entrepreneurship, hiring thousands of staff and bagging lucrative outsourcing contracts from clients in the United States and Europe.
Satyam was among the first firms to spot outsourcing opportunities in the year 2000 rollover problem. The company was listed in New York as well as on the Indian stock markets, and specialized in business software and back-office services.
"It was like riding a tiger, not knowing how to get off without being eaten," Raju wrote in his resignation letter in 2009, detailing years of financial deception at the firm.
Uma Maheshwar Rao, a lawyer for Raju, told Reuters that the Satyam founder would challenge the verdict in a higher court, but did not give any details. Some local media reported that an appeal could be filed next week.