Risk register · entry
Q-F · FraudSatyam Computer Services fraud
Years of steady IT-boom profit. The billion in bank cash was forged, one fake invoice at a time.
The fifth quadrant, where the thing was never real. The tell is that the story is too clean.
Why this quadrant
Per the SEC, management directed the creation of over 6,000 false invoices, entered them as revenue and receivables, then manufactured bank statements showing them paid, producing more than a billion dollars of cash that did not exist, roughly half the reported balance sheet. The reported series tracked the Indian IT boom too smoothly for a real receivables cycle. The founder-chairman's confession is what settles this as fraud rather than error.
The record
- As of 30 September 2008 Satyam's balance sheet showed over $1 billion in cash and bank balances when the actual amount was $66 million.certain
- Senior managers directed the creation of over 6,000 false invoices, which were entered into Satyam's general ledger; employees then created bogus bank statements showing those invoices had been paid.certain
- The fictitious cash and cash-related balances represented approximately half of the company's total assets.certain
- The fraud ran from at least 2003 through September 2008, overstating revenue, income, earnings per share, cash and interest-bearing deposits by more than $1 billion.certain
- Satyam paid a $10 million penalty to settle the SEC's charges, without admitting or denying the allegations; the NYSE suspended trading in Satyam's American Depository Shares on 7 January 2009, the day of Raju's confession.certain
Sources
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