Thursday, January 08, 2009

Indian Outsourcing Giant Admits Fraud

Washington Post | The leader of one of India's largest technology outsourcing companies, Satyam Computer Services, on Wednesday admitted cooking its books and committing other grave financial wrongdoing to inflate profits over several years. The revelation shook India's stock market and sent shockwaves across the country's booming software industry, while television commentators quickly dubbed Satyam "India's Enron."

Satyam's auditor, PricewaterhouseCoopers, said Wednesday that it was examining Raju's statement but declined to comment further. Satyam had 631 clients at the end of June, and U.S.-based companies make up an estimated 60 percent of its revenue.

Financial observers expressed fears that other Indian technology companies might be hiding accounting skeletons similar to those of Satyam, casting doubt on the celebrated outsourcing industry and oversight of its companies. Observers worried that the scandal could erode the confidence of overseas clients.

The National Association of Software and Service Companies in New Delhi issued a statement calling Satyam "a stand-alone case of failure of corporate governance" that is not a "reflection on the industry or corporate India."