17 January 2009

Satyam - new revelations - Board of Directors minutes

Stop press - update: Minutes of the audit committee meeting of Nov 2008 satyamAudit.pdf (don't miss the World Bank misrepresentation on pg. 8/9)

The Satyam Board of Directors' meeting's minutes of the infamous 16th December 08 are out and they make for interesting reading. Here is a copy in pdf. See page 2 bottom "evaluation for Maytas Infra has been based on the SEBI (Substantial Acquisition and Takeovers) Regulations, 1997 and for Maytas Properties based on the evaluation done by Ernst and Young one of the Big four accounting firms".
Comment: SEBI(SAST) regulations do not provide 'evaluation' - only a floor price and E&Y has hotly debated whether it had valued these for this context. Similarly, today's papers say the law firm Luthra & Luthra had not done any property due diligence except for the IPO of Maytas Infra.

"In view of the non disclosure agreement with the valuer, we are not able to disclose the name of the valuer to the public, Mr. Srinivas further informed" page 5.
Comment: This is legal trash, in any relationship of this nature - even high fiduciary relationships like attorney-client, the privilege of confidentiality belongs to the client. A valuer has no fiduciary relationship in the first place, secondly, there is no basis for such a confidentiality treatment even in contract, unless there is something very fishy going on.

An assertion is made about Maytas Properties having a land bank of 6,800 acres on the same page - however, a CNBC report could verfiy only 100 acres of this land (I have posted previously on this). This view is consistent with the statement on the bottom of page 6 that only 110 acres of 6,800 acres has been pledged with banks for loans. Obviously, you can't pledge more than you own. Practically every aspect of the presentation made was based on misrepresentation.

While there are so many gems in these minutes - it is clear the independent directors only asked enough questions to cover their rear. Obviously no meaningful questions were asked, at least not with any seriousness. This is reflected in their immediate satisfaction with any answer given, howesoever irrelevant and absurd.

Lesson learned for new Board: Get rid of the top management, as least those named in the minutes. Send them on a paid leave without bonus, if natural justice needs to be met, but don't let them into any office premises.

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