Satyam insider trading exposed

The Serious Fraud Investigation Office (SFIO) is understood to have come across clinching evidence of insider trading of the shares of Satyam Computers, days before the scam surfaced.

The SFIO, in its probe, established the occurrence of “systematic” insider trading of the shares while “minutely” examining the pattern of trading that took place over a period of time prior to the revelation of the fraud, sources in the corporate affairs ministry told Deccan Herald. The fraud came to light following Satyam’s disgraced founder chairman Ramalinga Raju admitted to fudging the accounts of the company over the years. The SFIO, the investigating arm of the corporate affairs ministry, had taken the help of the experts of the Securities and Exchange Board of India (Sebi) to decipher the possibility of insider trading, sources said. In its report submitted to the ministry, the SFIO is understood to have come across evidence of large-scale offloading of the shares of Satyam by institutional investors, days before the fraud was exposed, thus giving credence to suspicion of insider trading. While making in-depth scrutiny of some of the large size transactions in the sale of the Satyam shares that took place prior to the fiasco coming to light on January 7, the SFIO found that institutional investors like DSP Merrill Lynch, DSP Blackrock, IL and FS Financial Services and Deutsche Bank offloaded their shares a few days before Raju admitted to fudging the accounts to inflate profit figures and create fictitious assets. Fictitious assets The SFIO investigation is understood to have found that large-scale offloading of shares by the institutional investors took place after Satyam’s failed bid to acquire Maytas Infra and Maytas Properties, owned by Raju’s close relatives. In fact, consequent upon Satyam’s abandonment of the acquisition of the two Maytas firms, Raju admitted to fudging the account of the IT-firm while disclosing that the acquisition would have helped him to replace fictitious assets with real ones. The analysis of the trading pattern by the SFIO led to the conclusion that the aborted bid to acquire Maytas encouraged institutional investors, who could sense the impending crisis engulfing the IT firm, to get out of Satyam, sources said. The SFIO is understood to have taken specific note of some of the large-scale sale of the Satyam shares totalling nearly 2.45 crore in the first week of January up to January 5 this year—two days before the scam surfaced. These shares, which were sold off in quick succession, were the ones pledged by Raju’s family with various entities to raise loans. The offloading of these shares were learnt to have been carried out by the IL and FS Trust Company as a trustee for these debenture holders, sources said.