Companies threaten to cut Satyam business says newswire

Customers setting up contingency plans in case Satyam fails to stabilize; extent of fake headcount worse than reported

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By  Mark Sutton Published  January 23, 2009

Six clients of troubled Satyam have threatened to terminate their contracts with the company, according to a Dow Jones newswire report.

The unnamed companies have given Satyam ninety days to stabilize its business, or else they will cancel their business.

The United Nations also announced today that it has suspended Satyam as a vendor, and will review existing contracts with the company.

So far, only US insurer State Farm has openly cancelled contracts with Satyam, although many customers are believed to be looking at contingency plans. Rival Infotech Enterprises says that it has been approached by a number of Satyam clients, but declined to name them.

Prosecutors in Andra Pradesh confirmed yesterday that former Satyam CEO B Ramalinga Raju did siphon off funds from Satyam to other companies controlled by himself and his family.

Police also revealed that Raju had created 13,000 fake employees, more than double the number originally reported, and used these to draw up to $4 million per month in bogus salary payments. The figure means that fully one quarter of Satyam’s headcount was entirely fictitious.

Andhra Pradesh police believe that at least part of the funds were transferred through SRSR Holdings, a company set up by Raju to manage his family’s stake in Satyam. The general manager of SRSR, Gopal Krishna Raju, has been arrested.

Raju, former MD Rama Raju and former CFO Srinivas Vadlamani are all still in custody after police asked for more time to question them.

Satyam’s board met for a second time today, as discussions continue on appointing a bank to advise the company on its options, and selecting a new CEO and CFO.

Full coverage
Satyam boss did divert company funds to Maytas
Satyam chief may have pocketed missing $1 billion
No government bail out for Satyam
Satyam reaching out to customers in Middle East
New board appointed to resuscitate Satyam
Satyam CEO and MD arrested
Satyam chairman admits falsifying accounts

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