Upaid plea for Satyam brass depositions

HYDERABAD: Troubles for India’s fourth-largest IT major Satyam Computer Services are far from over.

At a time when the company’s management is said to have made progress in controlling the damage caused due to the ill-considered decision to acquire Maytas Properties and Maytas Infra, its one-time client Upaid Inc of US is seeking the deposition of the top three executives of the company —- chairman B Ramalinga Raju, chief financial officer Srinivas Vadlamani and global head of corporate governance G Jayaraman.

In its motion filed in Collin County, Texas district court in the US, Upaid has expressed its doubts about the asset stripping by Satyam management, which would have a direct impact on the outcome of its pending case whenever it is decided.

Says Upaid in its motion: “The executives whose depositions are being requested, Ramalinga Raju, (chairman) Srinivas Vadlamani (CFO) and G Jayaraman, (global head - corporate governance) are in the best positions to know Satyam Computer Services’ reputation in the business community and the events that have already permanently tainted that reputation.”

“Satyam is a global technology outsourcing company with a current cash surplus of $1.1 billion. So at the present time, Satyam has cash resources to pay a $1 billion plus judgment or the liquidity to support a supersedes bond.

“Incredibly, on December 16, 2008, Satyam announced a plan to strip $1.6 billion of cash out of the company, an amount that exceeds the cash surplus of the company, in a transaction whereby the large majority of this cash would go to the family of Satyam’s chairman, Ramalinga Raju.”

Upaid was a one-time client of Satyam. The online and mobile payment services company contracted the Hyderabad major in 1997 to develop a telecom platform and software. However, Satyam and Upaid landed in disputes while terminating their contract in 2002.

Subsequently, in 2007, Upaid had to settle a patent infringement case against Qualcomm and Verizon after discovering that the signatures of certain Satyam “inventor” employees in patent filing documents were forged.

Therefore, Upaid filed a case against Satyam in April 2007. Meanwhile, there were several jurisdictional issues on deciding the appropriate court. While Satyam wanted the case to be tried in London, Upaid argued for the US courts. In May 2008, the London court upheld a prior high court decision to allow the case filed by Upaid against Satyam to proceed in a Texas Federal Court. The case is scheduled for next hearing in June 2009.

Meanwhile, the aborted deal between Satyam and Maytas has raised concerns in Upaid about the possible cash that would be left with Satyam by the time the judgment on the case is out.

Upaid expects the value of damages it would be able to claim from Satyam would be about $1 billion. To ascertain this, Upaid is seeking the deposition of the three top executives of Satyam.

Satyam CFO Srinivas Vadlamani could not be reached for comment. However, a Satyam spokesperson said, “Since the matter is sub judice, we would not be able to offer any comments on this.”

Though Upaid is not seeking an direction from the court in its motion, the future of the buyback offer announced by Satyam would be directly linked to the outcome of the deposition.

“If Upaid seeks any direction restraining Satyam management from using the cash for buying back shares, it would further damage the company,” a legal expert specialising in corporate affairs in Hyderabad said on condition of anonymity.

Terming the recent acquisition proposal of Satyam as Raju’s plot to strip the company of its assets, Upaid said: “Upaid has a dual interest in the cancelled transaction and the related news stories (appearing on Satyam-Maytas deal).

“First, these news stories drive home the fact that the market has a very low opinion of Satyam and its corporate governance.

“Therefore, Satyam’s claims in this action that Upaid has disparaged its already tarnished reputation are baseless. Second, that Satyam would negotiate, agree to, and announce a transaction so clearly designed to deplete its assets in advance of a judgment, rightfully concerns Upaid that Satyam may be willing to engage in fraudulent transfers to avoid its legal obligations.”