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Insider trading: Sebi may pin Raju

This article was posted on Apr 4, 2009 and is filed under Stock News

Hyderabad: The multi-pronged investigation into the Satyam scam seems to be coming to an end with the Sebi team, along with the Central Bureau of Investigation, also said to have readied a preliminary report on the fraud. The three-member team’s report is likely to be submitted to the stock market regulator’s board later this month. According to sources, the Sebi team led by its general manager A Sunil Kumar has found prima facie evidence that Satyam founder B Ramalinga Raju and a few officials of the company indulged in insider trading.

Immediately after Raju admitted to fudging the company’s accounts, Sebi had sent an investigation team to Hyderabad to specifically look into market related irregularities in the episode.

It had earlier questioned Raju along with his brother B Rama Raju and ex-CFO of Satyam, Srinivas Vadlamani, in the Chanchalguda prison, where all the three accused are lodged.

“The investigation is a technicality. It is a clear case of insider trading. By fudging the accounts, the accused had artificially increased the company’s valuation, thereby impacting the share value of the company. They had pledged their shares at the artificially jacked up prices and only the accused had a clear knowledge of the real value,” a source explained.

Satyam promoters have reduced their holding from over 21% as of September 2002 to just over 2% as of December 2008. Though Raju had sent a letter on January 7 admitting to fudging the financials of Satyam, the Sebi team, during the interrogating of Raju in jail, had asked a set of questions on the lines of the contents revealed by Raju in his letter for preparing a statement and got his signature on the statement. Sources said the statement was more or less a repetition of the confession statement of Raju though it was not in the form of the original letter.

The Sebi team was on the verge of getting its hands around Raju on January 9, 2009, to record his statement about the jacking up of the company’s financials. However, the Raju brothers were picked up by the CID of Andhra Pradesh hours before that. The Sebi team had to knock the doors of the courts, including the Supreme Court, to get an opportunity to record the statement of the accused.

According to the insider trading norms, the accused, if found guilty, would be liable to pay a penalty of Rs 25 crore and go through a jail term of 10 years. Though the powers to penalise the guilty rest with the market regulator, the jail term has to be endorsed by the courts.

source: DNA India

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