UK-based Firm Files Motion Against Satyam

By M H Ahssan

Seeks Testimony From Top Satyam Officials Regarding Its Abortive Attempt To Buy The Two Firms

In a fresh blow to Satyam Computer, which came under fire for its proposed deal to acquire two family-related firms, UKbased Upaid Systems has asked a US court to seek testimony from top Satyam officials in connection with its abortive attempt to buy the two firms.

Upaid has filed a motion in Collin County, Texas district court to seek a testimony from top Satyam officials including the chairman Ramalinga Raju, CFO Srinivas Valdamani and global head corporate governance G Jayaraman in connection with the proposed buy, Upaid said in a statement.

Upaid, the online and mobile payment services firm further alleged that the IT major was trying to deplete its assets by acquiring the firms ahead of a judgment in a legal battle against it.

That Satyam would proceed with a transaction that seems so clearly designed to deplete its assets in advance of a judgment, rightfully concerns Upaid that Satyam may be willing to engage in fraudulent transfers to avoid its legal obligations, it said. Upaid CEO Simon Joyce told in an interview to a private news channel that had Satyam succeeded in siphoning this money off into the Maytas transaction that would have the effect of riching a number of members of the founders family.

Moreover it would have made it more difficult for the entity Satyam to meet any damages which the Texas jury might eventually award against them. Further Joyce said, “Our interest really is, we believe and the motion is arguing that it is right and proper that we should have an opportunity to ask the people who proposed this transaction and then defended it in a public domain to ask them what was in their mind when they were contemplating it.”

Satyam is facing suits in US Federal and state courts filed by Upaid claiming fraud forgery and breach of contract as a result of which Upaid has suffered damages to its business and prospects in excess of 1 billion dollar.

Federal court proceeding is scheduled for a Texas jury trial in June of 2009 and Satyam is facing the potential of a very sizeable judgement against it.

At present Satyam has cash resource to pay a one billion dollar plus judgment or the liquidity to support a supersedeas bond.

However on December 16, 2008 Satyam announced a plan to strip 1.6 billion dollar of cash out of the company, an amount that exceeds its cash in a transaction to acquire Maytas properties and Maytas Infra whereby the large majority of this cash would go to the family of Satyam chairman Ramalinga Raju.

“We are very concerned to be compensated for the huge damage which Satyam has done to us by perpetrating forgeries and fraud,” he said adding that Upaid is concerned to defend against the accusations that Satyam is making about defaming them. “I think our view of the world is Satyam’s behavior does more than enough. We don’t need to disparage them,” he added. Satyam declined to comment saying the matter was subjudice.

Sebi studying Satyam-Maytas deal: The Maytas deal that Satyam Computer had recently proposed, and then backtracked on the face of huge investor outcry, has come under the regulatory radar. On Friday, C B Bhave, chairman, Securities and Exchange Board of India (Sebi), said the regulator was studying the corporate governance issues concerning Satyam, Maytas Infrastructure and Maytas Properties.

“We do not want to react immediately to the incident (the acquisition bid that triggered investor outrage)...we will study issues involved and then come to a conclusion,’’ Bhave told reporters on the sidelines of a conference on securities markets hosted by National Institute of Securities Markets.

Bhave refused to comment any further on the issue saying that would be premature. The study would take whatever time it requires, he said.

On Monday evening, Hyberabad-headquartered Satyam had said it would spend about $1.6 billion from its reserves and also take some debts to gain majority control in Maytas Infra, a listed entity, and unlisted Maytas Properties. Both the companies which were proposed to be acquired were under the management control of Satyam’s promoters and their family members. According to one estimate, if Satyam had its way, the promoters would have made at least $1.4 billion at the cost of other non-promoter shareholders of the company.

Following huge investor outcry about dilution of corporate governance standards by Satyam’s board members, that included three promoters of the company, the company back tracked and hastily announced a buy back proposal. However, with several questions being raised about the conduct of the board members, including some by large institutional investors, the regulator has now decided to have a close look at the company’s recent decisions.

Other than the Satyam-Maytas affair, Sebi was looking at easing some of the restrictions in the currency futures segment and the possibility of including more market participants in that market, Bhave said. “There are some restrictions in this market on who can trade and we are now looking at if these restrictions can be relaxed,’’ Bhave said. The Sebi chief was responding to a question on whether other types of participants will be allowed in futures trading. At present, foreign institutional investors and non-resident Indians are not allowed to trade in currency futures.