Indian police raid PWC in Satyam probe
Blamestorming begins over $1bn accounts hole
Police raided PricewaterhouseCooper's offices in Hyderabad today in connection with the ongoing investigation into the alleged billion dollar fraud at outsourcer Satyam.
PWC audited Satyam's accounts and was apparently unaware of the large holes they contained.
The firm's chairman admitted last week to cooking the books over the course of several years. He wrote to directors and confessed to inflating profits and claiming non-existent assets and cash reserves.
The board has now gone and been replaced by three government-appointed directors. Chairman Ramalinga Raju, his brother Rama and the former CFO Vadlamani Srinivas were all arrested at the weekend ahead of a trial on 23 January.
Srinivas seemed to keen to blame PWC and Raju for the fraud. According to The Economic Times the CFO told police auditors never pointed out any problems with the accounts. He said Raju and the auditors dealt with bank deposits between themselves - much of the missing £1bn was claimed to be in bank accounts - and it is unclear whether PWC simply did not ask for evidence, or if certificates and bank statements were forged. PWC has previously said all audits were carried out correctly and supporting evidence was supplied.
The Indian Serious Fraud Office and stock exchange officials are also investigating the scandal which is threatening to taint the whole Indian outsourcing market.
The World Bank said yesterday that Wipro, along with Satyam and Megasoft Consultants, had all been put on a contractor blacklist for alleged malpractice in 2007.
Satyam has more than 50,000 staff and could benefit from a bailout from the Indian government if other finance cannot be found. But first the company needs to find out how much money and debt it has - the first task is to appoint new accountants.
In other news, rival outsourcer Infosys has posted figures showing quarterly profits up a third, but warned revenues for the year are likely to be lower than previously forecast. ®