Confession to seek lower penalty?

Call me cynical, but things looked very suspicious at Satyam for the past few weeks.
But even my cynicism could not begin to estimate the quantum of the fraud disclosed by Satyam chief, Ramalinga Raju.

And that, too, is only a voluntary disclosure. We still need to find out the real quantum of the fraud from someone other than the perpetrator.

There are 3 issues that rankle.
First is the timing of the confessional letter, which to me is not about guilt or an attempt to come clean. This was obviously sent on the expectation that the information was going to come out through another source.

No one in his right mind, particularly a fraudster, would confess to such a massive deception, unless it would result in a lower sentence/penalty for him. He, indeed, says he has not personally profited from the fraud and that the deception was merely an addiction.

Second, the scale of the fraud is immense. It stretches credulity that this fraud was possible without the active nodding and winking of a lot of people. Remember, this is a company listed in India and the US, fulfilling the high disclosure standards and public scrutiny of both countries. It has some of the most distinguished names, or so we thought, as independent directors. I refuse to believe that a fraud of this scale can go undetected by these people.

Third, the role of the audit committee as mandated both by Indian law and US law includes: “Oversight of the company’s financial reporting process and the disclosure of its financial information to ensure that the financial statement is correct, sufficient and credible”  and reviewing the work of internal and external auditors (Clause 49).

To add insult to injury of the shareholders, it is they who will pay the price of these peoples’ misdeeds when the firm  is sued in India and abroad as the promoters have bailed out with practically no shareholding remaining.

The writer is a former executive director- legal at Sebi. He is a faculty at IIM, Ahmedabad.