India-based IT company Satyam is facing scandal after its chairman, Ramalingam Raju, admitted he falsified approximately $1 billion of profit in the last several years. The incident, which some are calling India's Enron, may end up costing hundreds of IT workers in Australia their jobs and undermining confidence in one of the India's largest job markets.
Raju, one of the original pioneers of the outsourcing industry, sent a five-page letter to Satyam's board recently outlining assuming responsibility for the cooked books and says he is "now prepared to subject myself to the laws of the land and face the consequences thereof."
Austrailian media outlets speculate consequences of the fraudulent activity will reach its shores, resulting in massive layoffs. "Satyam employs 1700 people at offices in Sydney, Melbourne and Brisbane and counts among its customers some of Australia's biggest companies, including Qantas, National Australia Bank and Telstra, all of whom outsource IT jobs to Satyam in India," says The Age.
To make matters worse, some suggest that fraudulent activity of this magnitude couldn't have been orchestrated by Raju alone. “It is hard to believe that he (Raju) was the lone perpetrator all along. In any company, the CFO and financial committee members would have full access to balance sheet details,” Satyam's corporate lawyer Shreshta Tiwari told The Economic Times.
Other IT outsourcing firms in India worry that this will give the entire industry a black eye. Lakshminarayana, the chief strategy officer for Bangalore-based IT services company Wipro, Ltd. told the New York Times, “One only hopes that with the kind of scrutiny and the kind of focus this brings, everybody doesn’t end up being painted with the same brush."
On U.S. soil, a class action lawsuit has already been filed against the company, claiming "Satyam and certain of its executives violated federal securities laws by issuing materially false and misleading statements." That's a big change from last year when consumer confidence in India topped global rankings.