Ex-directors of Satyam win ruling in US class-action suit

Friday, 4 January 2013 00:01 - - {{hitsCtrl.values.hits}}

Reuters: A United States federal judge dismissed claims against seven former directors of Satyam Computer Services in shareholder lawsuits stemming from the massive fraud at the heart of India’s largest corporate scandal.

The US District Judge, Barbara Jones in New York ruled on Wednesday the lawsuits failed to allege that the ex-directors recklessly failed to discover the fraud, which came to be known as India’s Enron.

The lawsuits centre on the revelation by Satyam’s founder and former chairman, Ramalinga Raju, that what had been India’s fourth-largest outsourcing firm had for several years inflated its revenue, income and cash balances by more than US$ 1 billion.

In her decision on Wednesday, Jones said the allegations primarily focused on the actions of a small group of insiders, reinforcing an inference, the audit committee’s members ‘were themselves victims of the fraud’.

Lawyers for the directors welcomed the decision.

“It was truly unfortunate that these directors, diligent individuals of the highest integrity, were ever named as defendants,” said a lawyer for five of the seven directors Irwin Warren, involved in the case.

A lawyer for former board member Vinod Dham, Gordon Atkinson, in an email said the decision would hopefully help vindicate his client and the other outside directors, “Who were themselves victims of the Satyam fraud, not perpetrators or otherwise responsible for it.”

Lawyers for the plaintiffs did not respond to requests for comment.

Satyam shareholders began filing lawsuits in 2009 after the scandal broke.

In 2011 Satyam, now called Mahindra Satyam, and its Auditor, PricewaterhouseCoopers, agreed to pay US$ 125 million and US$ 25.5 million, respectively, to settle claims filed by shareholders.

That same year, Satyam and PwC agreed to pay a combined US$ 17.5 million to settle claims made by the US Securities and Exchange Commission and Public Company Accounting Oversight Board.

The 2011 settlements did not include Satyam’s former directors, who continued to litigate the case that ultimately ended in Wednesday’s ruling.