- The Washington Times - Sunday, January 11, 2009

NEW DELHI | Police arrested the chief financial officer of embattled outsourcing giant Satyam Computer Services Ltd. on Saturday, the third executive to be charged in a massive fraud scandal that threatens to roil India’s flourishing tech industry.

The arrest of Vadlamani Srinivas came as authorities tried to contain the $1 billion fraud by dissolving the company’s board, including the interim head, and announcing plans to name 10 replacements.

The scandal broke Wednesday, when Satyam’s founder and former chairman, B. Ramalinga Raju, confessed to filling the company’s balance sheets with “fictitious” assets and “nonexistent” cash in an extraordinary letter to the company’s board.

The company, which is now fighting for its life, could no longer conceal the $1 billion hole after a deal intended to save the struggling company was abandoned, Mr. Raju said in the letter.

He resigned from Satyam — Sanskrit for “truth” — on Wednesday, along with his brother, former Managing Director B. Rama Raju. The brothers were charged Saturday with criminal conspiracy, forgery, criminal breach of trust and falsifying documents, said senior police official V.S.K. Kumudi. They face up to life in prison, he said.

Mr. Srinivas, the third-ranking executive at Satyam, was arrested and charged with the same offenses Saturday night, Mr. Kumudi said.

Satyam is headquartered in India’s southern Andhra Pradesh state and employs 53,000 people — among the 2 million Indians working in the country’s booming high-tech industry, which last year brought in an estimated $40 billion. The company’s clients include a number of Fortune 500 companies including Nestle, General Electric and Ford Motor Co.

Corporate Affairs Minister Prem Chand Gupta dismissed Satyam’s board late Friday night and in an official statement condemned “the greed and misdeeds of a few persons who were at the helm of affairs of the company.”

The statement said the central government would appoint 10 people “to function as directors of the company,” but no one had been named to the seats.

Although Satyam is a publicly traded company, the government is able to intervene in extraordinary circumstances to stabilize the company.

Mr. Gupta told reporters the new board would hold its first meeting in one week and will appoint a new management team.

Archana Uttapa, a Satyam spokeswoman, said the company did not know who would be named to the new board. A board meeting scheduled for Saturday was canceled, she said.

Miss Uttapa said the “business side continues,” with work scheduled to return to normal Monday. She denied Indian media reports that the company was considering firing 10,000 employees.

While the media have speculated about mass layoffs and whether the company can meet its payroll, Miss Uttapa said employee salaries have been paid through December and cleared for January. She declined to comment further.

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