US court dismisses claims against Satyam Computer ex-directors

BS Reporters / Hyderabad/ Bangalore Jan 04, 2013, 01:13 IST The court did not find in the suit facts to suggest the directors had personally benefitted from the fraud

In a big relief to former directors of the erstwhile Satyam Computer, a US court dismissed a class-action suit that alleged they had ‘recklessly failed’ to discover the accounting fraud in the company which came to light in 2009. The court found the suit by the shareholders failed to adequately prove the allegations of fraud and negligence against them and the complaint “contains no facts” suggesting the directors benefitted personally from the fraud.                 The fraud had become known when the company’s founder and then chairman, B Ramalinga Raju, in January 2009 admitted to overstating Satyam’s financials by over $1 billion, besides other wrongdoings at the firm. Following this, some of the US shareholders of the company, including Public Employees’ Retirement System of Mississippi, Mineworkers’ Pension Scheme, SKAGEN AS and Sampension KP Livsforsikring A/S had filed a class-action suit against the directors in a US district judge court in New York. In her 71-page ruling pronounced on Wednesday, US district Judge Barbara Jones said even the ex-directors of the company themselves were victims of the fraud. The court’s ruling has come as a big relief for the former board members, most of whom were independent directors. “I am quite happy with the verdict,” said M Rammohan Rao, former Indian School of Business dean, also an independent director at Satyam when the fraud surfaced. “We knew we had not done anything wrong,” he added. When the accounting fraud had been discovered, Satyam had ten directors, six of them independent. The former independent directors named in the lawsuit include Krishna Palepu (professor of business administration and senior associate dean at Harvard Business School), M Rammohan Rao, T R Prasad (a former Cabinet Secretary and defence secretary) and Prof V S Raju (a former director, dean and professor at an Indian Institute of Technology). “All investigating agencies have found we have done nothing wrong. The court verdict is good and appropriate. I feel happy,” said T R Prasad. V S Raju added: “We are delighted. We were ignorant of what was happening in the company. The investigating agencies also did not find anything wrong done by us.” Even in his January 7, 2009, statement confessing to the accounting fraud, Ramalinga Raju had said “none of the board members, past or present, had any knowledge of the situation in which the company is placed.” After the fraud came to light, Mangalam Srinivasan was first independent director to resign, owning moral responsibility. He was followed by Krishna G Palepu, Vinod Dham and M Rammohan Rao.