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India asks US not to take action against Satyam

This article was posted on Jan 11, 2010 and is filed under Market News

Does not want Satyam shareholders to be punished twice.

India has requested authorities in the United States not to take any action against scam-hit Satyam, as it would amount to punishing shareholders of the IT company for a second time.

“Sebi has marshalled a request (to US Securities Exchange Commission) and we are monitoring them. On the political level such signals can be sent and we have already sent them,” Corporate Affairs Minister Salman Khurshid said, when asked whether the government has taken up the issue of Satyam with the US authorities.

Satyam Computer Services, now Mahindra Satyam, can face punitive action in the US as the company’s shares were listed and traded on American bourses. It is also contesting about a dozen class action suits in US courts which could entail a heavy penalty on the company.

Also, the company can face action by the US Securities Exchange Commission (SEC).

“The case has been laid out quite well. And the case being that nothing should actually punish the shareholders a second time over…Because any fine imposed on the company will inevitably hurt the shareholders,” Khurshid said.

The American administration would understand the issue, the minister hoped. “But I am keeping my fingers crossed,” he said.

Satyam founder B Ramalinga Raju’s disclosure of accounting fraud on January 7, 2008, is reported to have resulted in a loss of around Rs 14,000 crore to the shareholders.

In the US, the securities laws have empowered defrauded investors to get compensation from the errant parties. SEC can also enforce action and get damages/compensation for investors.

On January 7, the day when Raju disclosed the fraud to Indian market regulator Securities and Exchange Board of Indi, the New York Stock Exchange(NYSE) halted trading in Satyam after the stock plunged by over 90 per cent to $0.85 in pre-market trade.

The American Depository Receipts of Sify Technologies nosedived 17.98 per cent to settle at $1.46. Besides, shares of two private sector lenders — ICICI Bank and HDFC Bank — plunged as much as 13 per cent on the NYSE.

source: Business Standard


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