Could B Ramalinga Raju inflate Satyam’s headcount by a whopping 13,000 and manage as many salary accounts, withdraw cash from them every month for several years, appraise these fictitious employees annually and possibly give them impressive ratings and hikes all by himself, without any support? Clearly, no.
Senior HR consultants and company sources say that it is impossible for Raju to have carried out this fraud without a “back office infrastructure’’ supporting him not only for transactions on these accounts but even sustaining these numbers for as long as they have existed.
Public prosecutor Ajay Kumar said during Raju’s court hearing on Thursday that Satyam’s 53,000 headcount was inflated and that the disgraced Satyam founder withdrew millions of rupees every month in the name of non-existent workers. Though sources said that executives in HR would have not guessed the manipulation, they indicated that it could have been done at a senior level.
The role of the finance and HR head, say sources, cannot be ruled out in a fraud of this nature, which is otherwise practically impossible or extremely difficult to execute. Senior HR consultants agree. “We are talking about 20 per cent of the total employee strength that did not exist. You can hide 10 people, not 13,000. There is obviously a team to manage these numbers, an entire back office dedicated for this alone,’’ says senior HR professional Varda Pendse, director, Cerebrus Consulting. She pertinently adds that it would be difficult to believe that the HR head didn’t know or was clueless about the fudged numbers. Satyam’s senior vice president in chrage of HR is an old company hand A S Murthy.
Why an entire “team’’ would have existed to support the inflated head count is the possible modus operandi to execute this fraud. A senior banker states that the salary accounts could have been created by using the documents Satyam received from people seeking jobs. “The details of a person on the CV such as address etc and the attached picture are enough to open an account. The signature of the person could have been forged,’’ the banker said.
The banker further notes that the transaction on these accounts that would not leave a trail was that of cash withdrawal. “Transfer of money to other accounts would leave a trail but not if a person is withdrawing money. But it is impossible that Raju would have withdrawn cash personally from so many accounts. He at least would have needed a team of minimum 10 to 12 people,’’ he said.
Besides, HR experts note that given the average IT attrition rate of 11 to 14 per cent, applicable even to Satyam, would have perhaps never reflected in the bank accounts with the finance section not informing the bank and keeping the salary account active. In fact, a senior company source said that the company isn’t really known for its “internal control’’ on accounts. “A bank had visited us seven to eight years ago to discuss making recoveries from the employees’ salary account, when HR executives admitted that accounts in some cases have remained active three to four months after the employee had quit,’’ says the source. Bankers say that this “loophole was perhaps deliberately created and even made systematic’’ over the years.
E Balaji, CEO and director of Ma Foi Managament Consultants further notes that while it could still be possible for a company with 40,000 or more employees to manipulate 400 to 500 numbers but creating 13,000 employees cannot go unnoticed. “The HR and finance work together and there are rudimentary checks on the number of people by the person handling payrolls. These are normal processes. It is not difficult to identify the manipulation,’’ he said.
And once again, apart from the HR and accounts department that were possibly Raju’s back office for manipulation, it is the role of the auditors being questioned again. “Auditors have a huge role to play. They can’t do a physical headcount but they can do random audits, pick up 50 people and seek their bank account details from the company,’’ said Shiv Agrawal, CEO, ABC Consultants.
Nevertheless, HR experts wonder whether the teams meant for such checks (auditing, HR and finance) were actually acting as Raju’s support system as he allegedly crafted his scam.
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