ED has issued attachment orders freezing fixed deposits worth Rs 822 cr of B Ramalinga Raju, founder of scam-hit Satyam computers.
HYDERABAD/NEW DELHI: Enforcement Directorate (ED) on Thursday issued attachment orders freezing fixed deposits worth Rs 822 crore of B Ramalinga Raju, founder of scam-hit Satyam computers, and his family in connection with its probe in the money laundering case.
The orders issued by the Hyderabad zonal office of the agency specify that these deposits, held in the accounts of Ms Satyam Computers and Services Limited (SCSL), were being attched as it has identified these value of assets as “proceeds of crime” under the Prevention of Money Laundering Act (PMLA).
The accounts of SCSL, according to the ED attachment order, in Andhra bank, Bank of Baroda, IDBI and ING Vysya have been freezed, even as the agency has filed a complaint in this regard with the Adjudicating authority of the PMLA in Delhi.
The ED attached the accounts of SCSL as its probe found that Raju and his associates “wrongfully” offloaded inflated shares of the said company by way of sale or pledging of shares, the order alleged.
According to the order, Raju and his family members allegedly “lured” investors into buying these shares by publishing “false” information about the financial credentials of the scam-hit company.
“Trail of loans derived from front companies revealed that Rs 822 crore out of Rs 2171.45 crore found their way to Ms SCSL and were used for day-to-day expenses like payment of salaries among others.
Raju in January 2009 confessed to mis-stating accounts to the tune of Rs.7,136 crore over a period of several years. His confession, which he later retracted, plunged Satyam into a crisis, triggering an employee exodus and client defections from the company, then ranked India’s fourth biggest computer services provider.
Satyam was rebranded Mahindra Satyam after its purchase by Tech Mahindra Ltd in April 2009 in an auction overseen by government-appointed directors. The firm refused to comment on the latest actions of the ED.
Mahindra Satyam acknowledged being served a provisional attachment order attaching its fixed deposit accounts for 150 days. In a late evening statement, Vasant Krishnan, chief financial officer of Mahindra Satyam, said the company was examining the implications of the order and will respond appropriately.
“Since this amount subsists with Ms SCSL and constitutes a part of the loans that were derived or obtained by pledge of inflated shares of Ms SCSL, which is, Rs 2171.45 crore they fall within the mischief of proceeds of crime under the PMLA and are liable for attachment,” the order said.
An attachment under PMLA ensures that such assets cannot be used by the accused and he/she cannot take any benefits from these properties, and such an order can be challenged by the accused at the adjudicating authority of the said Act.
The ED had framed its case on the basis of the CBI FIR registered in this case and two subsequent charge sheets the probe agency filed in 2009.
The ED order explained the modus operandi of the sale of these shares to investors, which the agency alleges, were done by publishing wrong information.
“B Ramalinga Raju, Chairman of SCSL, had conspired with the other accused persons during the period 2001-2008 and lured investors into buying the shares of SCSL during this period by continuously publishing falsified books of accounts, thereby projecting a very rosy financial picture of the company for keeping the share prices of SCSL inflated.
“Raju who knew the true state of affairs of the finances in Ms SCSL, got the shares of SCSL held by him and his family members offloaded at opportune times and gained wrongfully. Offloading of inflated shares of Ms SCSL occurred by way of sale or pledge of shares,” the ED said.
According to the probe of the agency, all the shares held in the name of Raju, his brother B Rama Raju, B Nandini Raju W/o Ramalinga Raju and B Radha Raju W/o B Rama Raju were transferred to Ms SRSR Holdings Private Limited in which family members of Ramalinga Raju were the directors.
The order said Ms SRSR Holdings pledged the inflated shares with non-banking financial companies and loans to the extent of Rs 2171.45 crore were obtained based on the inflated value of shares of Ms SCSL.
“These loans were circuitously transferred among the 327 front companies floated by Ramalinga Raju, his relatives and his associates to disguise the true source of funds. The front companies used these loans to buy properties in Andhra Pradesh, Karnataka, Maharashtra and Tamil Nadu.
The ED has earlier attached 354 properties in this case which are valued at approximately Rs 250 crore.
The CBI, which has investigated the case, in all, identified 425 properties spread over 1224 acres acquired by Raju through front companies, spread in different parts of Andhra Pradesh, besides Chennai, Bangalore and Nagpur. The Rajus had acquired these properties by selling their shares in Satyam Computers between April 10, 1999 and June 30, 2005.
These properties were in addition to the properties spread over 4533 acres already attached by the Enforcement Directorate (ED) under the Prevention of Money Laundering Act. The properties attached by the CBI and the ED included large chunks of lands and plots, besides a few flats and plots in the posh localities of Hyderabad and Bangalore. His son Teja Raju’s Jubilee Hills residence also has been attached. The single biggest property attached by the ED authorities was 4,000 acres of land at Loyapalli village of Ranga Reddy district which was in the name of a front company floated by Raju.
Fraud worth Rs. 14000 Crore
The Satyam fraud worth Rs. 14,000 crore, according to the CBI, was one of India’s largest corporate scams. In January 2009, Mr Raju shocked investors when he admitted that the firm’s profits had been overstated for years and assets falsified. Mr Raju was arrested in 2009 and spent nearly two years in jail in Hyderabad before being granted bail by the Supreme Court in November 2011.
A management graduate from Ohio University, Mr Raju founded Satyam in 1987. After Mr Raju’s arrest, Satyam was sold to IT firm Tech Mahindra, majority-owned by auto maker Mahindra and Mahindra and part-owned by British telecom firm BT, in an auction. It was subsequently renamed Mahindra Satyam.
(PTI/India Today/Reuters/LiveMint Oct 18, 2012)
(Photo: Enforcement Directorate, which is investigating the alleged fraud, says Raju and his family members have raised loans worth Rs.2,171.45 crore by pledging shares with non-banking finance companies based on the inflated value of Satyam’s shares. Photo: Mint)