Satyam: If you are a crony capitalist, 5 yrs and a confession aren't enough

The Indian legal system has flunked its first major test of action against crony capitalism: the Satyam scandal, where business was in bed with politicians.

Exactly five years ago from today, Indians woke up to read a confession by B Ramalinga Raju, chief promoter of Satyam Computer Services, that he had committed financial fraud by overstating profits and cash in the bank to the tune of around Rs 6,000 crore. This confession was made in a statement sent to the stock exchanges the previous day (7 January 2009).

It was an open-and-shut case: a confession that was sent voluntarily and not obtained under duress. All the Central Bureau of Investigation (CBI) had to do was to arrest Raju, get him to make the same confession in front of any magistrate (possibly under section 164) so that the confession is valid as evidence, and get him sentenced - even while investigating his other frauds and dubious actions.

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[caption id=“attachment_113498” align=“alignleft” width=“380”]  Five years after a confession, the Satyam case involving B Ramalinga Raju is nowhere near a verdict even as new complications are being added to prolong the case.AFP[/caption]

But then, Satyam is not just any other case. It is a case of super crony-capitalism, where Raju was favoured by several powerful Andhra Pradesh politicians, including and especially the Congress party’s strongman, the late YS Rajasekhara Reddy. When powerful politicians are involved, you can be sure that crony capitalists will get a lot of leeway from the legal system.

This is precisely what has happened. Even though the CBI claims to have iron-clad evidence to nail Raju, three months ago the Enforcement Directorate (ED) launched another case against Raju and 212 others for allegedly laundering money using a “corporate veil.”

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Normally, such cases would have to be heard elsewhere, but the legal system sent this case too to the Special Court hearing the primary case. And depending on what the judge decides, the cases could get clubbed and/or prolonged indefinitely.

As is the practice is all such cases, Raju duly retracted his confessional statement - in which he said that the balance-sheet as on 30 September had inflated cash and bank balances by Rs 5,040 crore, accrued interest by Rs 376 crore, and had an overstated debtors’ position by Rs 490 crore.

According to a Times of India report, Raju told the court in April 2010 that “I am not the author of the email sent to various agencies that admitted to the Satyam accounts being inflated.”

This is, of course, disingenuous, for in the same mail Raju also claimed that he had lent the company Rs 1,230 crore from personal funds, and in the second half of 2012, 37 companies belonging to the Raju family and IL&FS, the company which took over another Raju company, Maytas, tried to block the merger of Satyam with TechMahindra claiming they were owed money.

The confession apparently only denies the fraud, but not the part which claimed that Raju and his private companies lent money to keep Satyam afloat. In his 7 January 2009 confessional, after admitting to overstating cash and accrued income, Raju had also said that the company had an “understated liability of Rs 1,230 crore on account of funds arranged by me.”

It is not clear how long the Satyam case will drag on. As someone who is already out of bail, the longer the case prolongs, the better it is for Raju. Both CBI and ED took their time to file charge-sheets - which show how much importance they attach to this case.

Crony capitalism, far from paying a price for admitted fraud, is actually enjoying a vacation, thanks to a legal system that can take five years (and more) for a case that started with a straightforward confession.