Facing a Sebi order to cough up Rs 1,849 crore plus interest for making “unlawful gains” in Satyam scam, the erstwhile IT major’s founder-chairman B Ramalinga Raju and four others have approached the Securities Appellate Tribunal against the market regulator.

The Tribunal has listed all the five pleas, filed separately, for hearing tomorrow to consider their “admission”.

Closing five-and-a-half year long probe into the country’s biggest corporate fraud, Sebi on July 15 barred erstwhile Satyam Computer’s then Chairman B Ramalinga Raju and four others from markets for 14 years and asked them to return Rs 1,849 crore worth of unlawful gains with 12 per cent interest resulting into total disgorgement amount of over Rs 3,000 crore.

Others facing the prohibitory orders include Raju’s brother B Rama Raju (then Managing Director of Satyam), Vadlamani Srinivas (ex-CFO), G Ramakrishna (ex-vice president) and V S Prabhakara Gupta (Ex-Head of Internal Audit).

A Sebi order can be challenged before the SAT within 45 days of the directions being passed. While the two Raju brothers filed their present appeals against Sebi order on Friday, Srinivas, Ramakrishna and Gupta moved their respective pleas a few days earlier.

As per Sebi’s order, the money was asked to be deposited with the regulator within 45 days, while interest would be levied at 12 per cent per annum with effect from January 7, 2009, the day this mega-scam came to light through a letter written by Raju himself.

The disgorgement amount can exceed Rs 3,000 crore after taking into account the applicable interest payments.

In its 65-page order, Sebi said these five persons “have committed a sophisticated white collar financial fraud with pre-meditated and well thought of plan and deliberate design for personal gains and to the detriment of the company and investors in its securities”.

The regulator, which had exercised the powers given to it through promulgation of an ordinance for passing disgorgement orders, further said that the “financial frauds as found in this case are inimical to the interests of the investors in securities and endanger the market integrity”.

Later last month, a new law was notified to replace this Ordinance with Securities Laws Amendment Act, which has amended three key securities market Acts to grant greater powers to Sebi to take on fraudsters and other market manipulators.

Sebi’s Whole-Time Member Rajeev Kumar Agarwal said in his Satyam order: “I am convinced that this is a case where befitting enforcement action is necessary to send a stern message to the market to create an effective deterrence.”

On January 7, 2009, Raju, the then chairman of Satyam Computers had sent an email to Sebi, wherein he admitted and confessed to inflating the cash and bank balances of the company, besides understating liabilities and other financial mis-statements.

After the fraud came to light, the government had ordered an auction for sale of the company in the interest of investors and employees of what was known at that time as the country’s fourth largest IT firm.

The company was later acquired by Tech Mahindra, then renamed as Mahindra Satyam and eventually it was merged with Tech Mahindra.

The ‘unlawful gains’ were made by Raju, along with his family members and other accomplices, by selling or pledging company shares at inflated prices, which in turn was done by over-statement of bank balances, creation of fake customers, over-statement of revenues and under-statement of liabilities.

At the same time, the company books were also manipulated by non-inclusion of certain receipts and payments, resulting into overall mis-statements to the tune of Rs 12,318 crore.

According to Sebi, the two Raju brothers had made “unlawful gains” to the tune of Rs 543.93 crore from the sale of shares and Rs 1,258.88 crore by way of pledging of some shares.

Besides, Srinivas, Ramakrishna and Gupta have made “unlawful gains” worth Rs 29.5 crore, Rs 11.5 crore and Rs 5.12 crore, respectively through the sale of shares.

Ramalinga Raju and Rama Raju, being the Chairman and Managing Director, respectively, of Satyam Computers were ‘insiders’, while Srinivas, Ramakrishna and Gupta being ‘connected person’ were actively involved in the manipulation of books of account and mis-stating of the financials of Satyam.

“In this case, the noticees (Raju and four other officials), apart from above contraventions, have failed to observe their fiduciary duties and have violated the principles of corporate governance in general and the obligation of CEO/CFO certification stipulated in clause 49 of

the Listing Agreement, in particular,” Sebi said.

The countdown for Satyam and its founder began on December 16, 2008, when the software firm announced its intent to acquire a 51 per cent stake in Maytas Infra Ltd and a 100 per cent stake in Maytas Properties, promoted by Raju’s sons,

Teja Raju and Rama Raju, for around USD 1.6 billion. The deal was severely opposed by other investors in the company, forcing Raju to call off the proposed acquisition within a day of the announcement, on December 17, 2008.

Then, on January 7, 2009, Raju resigned from the Satyam board after saying he had falsified the earnings and assets of the company for years.

His letter to the board said he tried to sell the two promoter-related firms to Satyam in a final attempt to plug “fictitious” cash on the company’s balance sheet.

Soon after the fraud came to light, Raju was arrested for massive accounting fraud. He was granted bail in November 2011.

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