Sebi to recover Rs 3,000 cr from five Satyam execs

The Securities and Exchange Board of India (Sebi) on Tuesday slapped a penalty of around Rs 3,000 crore on five former Satyam Computer executives, including founder B Ramalinga Raju, for violation of various securities market regulations like the one on insider trading. The market regulator also barred these individuals from accessing the securities market for 14 years.

According to the Sebi order, Raju, his brother Rama Raju and two other senior executives of the company made unlawful gains to the tune of Rs 1,850 crore by selling or pledging Satyam shares while in possession of insider information, including that on financial irregularities brewing at the firm.

Sebi has asked Raju and others to disgorge within 45 days the wrongful gains of Rs 1,850 crore, with a simple interest of 12 per cent a year since January 2009. The total penalty with interest works out to around Rs 3,000 crore.

The ban and the penalty will be applicable to Former Satyam chairman B Ramalinga Raju, former managing director Rama Raju, former chief financial officer Vadlamani Srinivas, former vice-president (finance) G Ramakrishna and former head of internal audit Prabhakara Gupta.

"In this case, the individuals committed a sophisticated white-collar financial fraud with pre-meditated and well-thought plan and deliberate design for personal gains and to the detriment of the firm and investors in its securities," said Sebi whole-time member Rajeev Kumar Agarwal in a 65-page order.

The regulator has charged these individuals with alleged violation of various provisions of the Sebi Act, Prohibition of Fraudulent and Unfair Trade Practices (PFUTP) Regulations and Prevention of Insider Trading Regulations (PIT).

The Satyam scam came to light in January 2009, with an email to the regulator confessing to financial irregularities in the technology company. Cash and other bank balances of Rs 5,040 crore on the balance sheet were non-existent. Debt and interest positions were also falsified.

"It is an undisputed fact that the price of the company's scrip slid to a low of Rs 41.05 on January 7, 2009, from Rs 178.95 at the previous day's close on NSE, after the news on financial irregularities became public. This also shows the information about the adverse financial position of Satyam Computer and the fudged financial numbers was price sensitive. While in possession of the 'unpublished price-sensitive information', some of the individuals sold, transferred and pledged the shares of Satyam at high prices and benefitted substantially at the cost of other unsuspecting investors in the market," the Sebi order said.