Satyam fraud may have started in 1992-94: Vineet Nayyar

For , managing Tech Mahindra’s acquisition of Satyam Computer Services has been the toughest assignment in his career spanning over four decades. In an exclusive interview to ET’s Pankaj Mishra, Mr Nayyar, Mahindra Satyam’s chairman, talks about how the new management of the combined entity had to sift through over two million emails, about 30 terabytes of data, and over 7,500 inflated invoices for reporting the company’s financial accounts for the first time in two years. Edited excerpts:

Some investors and experts believe more clarity was needed, especially on the financial accounts before 2009.

We have tried to be as transparent as possible. Nothing has been held back. Obviously, we could not give anything earlier because of SEC and other reasons. But, preparing these records have been a nightmare. Major fraud... god knows when it started. Perhaps much before 2008. I think it started right at the beginning, during 1992-94 . It’s an old fraud and has been going on for many years. The ADR money was parked and spent like anything. These habits don’t get inculcated suddenly. It should have been there in the DNA. It was a nightmare to go through it (the data). We tried to get as accurate details as possible from the financial auditors.

How critical is it to get details about what happened before 2009? Isn’t that an important question for investors and potential customers that needs to be answered?

Frankly, we are an IT company. The data are only of historical value. We have controlled expenditure, and we have made it a point to see that the cash flow does not come down drastically. We will build on that. After all, in an IT company, what is the expenditure for? We have to spend on telecom, staff, travel and food. If you stop paying for any of these things, the company will not function. So, there can’t be an overhead, other than those relating to legal issues, that we are not aware of. By and large, our estimates tally with what the previous chairman had said. In that respect, he must have been a genius in keeping accounts. There has been a huge erosion in brand equity. Whenever the company goes to the boardroom for large engagements, it’s always about the Satyam brand — they say it’s a fraud company. We are going to rectify this, and it will take us two-three years.

Looking back, what have been the top revelations, considering that you have seen many mysteries unfold?

What came as a surprise to us was that this fraud could have continued for some more time. I don’t believe that would have been possible without the complicity of the auditors. So, I’m not looking at negligence here. But just think of it. You may not have seen it for two quarters. But you can’t say that for 44 quarters. It’s too long a period to be true. Secondly, if I planned to commit a fraud, would I do something so easy? Even a junior accountant could have tallied and matched the accounts . Until and unless the team allows it, this cannot be done. Would you do this? Put yourself in Raju’s position. He is brilliant because the numbers he gave were the exact numbers we got after putting an army of accountants to go through them. The tally is exact. Therefore, the question is: what were the accountants doing? They were not doing their job.