Accounting regulator Institute of Chartered Accountants of India (ICAI) probe panel has hit out at banks for not doing due diligence on Satyam Computer Services before giving loans, and wondered why the government put Deepak Parkeh on its board despite his HDFC group being a major creditor to Ramalinga Raju’s company.

“There is no explanation as to why the banks… while sanctioning short-term loans did not seem to have posed any question as to why the company which was supposedly cash rich as per its financial statement was taking loans from them,” said the ICAI in its final report on the Saytam scam.

The banks that gave loans to Satyam during 2000-08 despite the company claiming huge surpluses, were HDFC Bank (Rs 530 crore), Citibank (Rs 223.87 crore) Citicorp Finance (Rs 222.28 crore), ICICI Bank (Rs 40 crore) and BNP Paribas (Rs 20 crore), totalling Rs 1221.16 crore.

The high-powered group of ICAI, headed by former President Uttam Prakash Agarwal, also questioned the appointment of HDFC Chief Parekh on the board of Satyam to revive the IT company following the scam. “…the Committee is unable to understand how the Chairman of HDFC Bank was appointed as an independent director post Satyam fiasco,” said the report, which has been submitted to ICAI’s council for further action. Although Parekh, who heads HDFC, is not the Chairman of the Bank, the reference in the report is to him only, said a member of the committee when contacted.

Following the admission of the fraud by Raju in January 2009, the government superseded the then Satyam board appointing its own nominees who, besides Parekh, were Kiran Karnik, T N Manoharan, S B Mainak, C Achutan and Tarun Das.

The committee has also recommended disciplinary action against “the audit firm, its partners…the then Chief Financial Officer (CFO) and the head of internal audit department.”

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  1. Nadey says:

    I am only reproducing my comments appearing above. The role of the persons named in this item is rather well known in many other unreported but hushed up scams-is it not? Then why all this drama after the horse has bolted from the stable and some of the persons named in this item have risen from power to power, so as to be privileged to have the ears of the PM/PMO !
    Moreover, Satyam’s was not an one-off instance and, in fact, this practice has been known even to ordinary public, what to talk of the members of the Institute doing audits for decades. Even the accounts of some of the largest PSUs, which are still hundred percent President-owned, if truly audited, will open pandora’s box as in most cases their profits are inflated to issue dividends and present the dividend cheques to the Ministers with a lot of photo-op and fanfare/publicity! And all this is within the knowledge of the CAG too. Satyam’s case is merely an eye opener. Many huge private companies (including banks!) who were searched by the IT department and had to disclose their unaccounted income before the settlement commission never disclosed these facts in their published annual accounts/reports, thus totally keepinh their stakeholders in the dark and depriving of their rightful share in those profits. These cases were represented by CAs who were not always the concerned auditors, but can they avoid their responsibility and liability to the Institute?

    Unless the Instt. starts a deep introspection about the rise of some of its big ex-executives’ rise into prominence/powe within a short span of 10-15 years, it would all be futile and will as usual again end in a farce, notwithstanding the good intentions of the present President of the Institute. He cannot fight against the standards prevailing in his profession. Period.

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