Five Dumbest Things on Wall Street: Jan. 9

Mumbai's Madoff (or Bombay's Bernie)

Bernie Madoff has a friend in Mumbai.

Ramalinga Raju, the founder and chairman of Indian outsourcing firm Satyam Computer Services(SAY Quote), stepped down Wednesday after disclosing that he had been falsely inflating profits for years at India's fourth-largest software services company. Raju said in a statement that about $1 billion, or 94%, of the cash on the company's books was fictitious.

Raju's shocking disclosure sent Satyam's Bombay-listed shares, Indian equity markets and the Indian rupee tumbling, with Bombay's benchmark index falling 7.3%. Satyam's New York-listed American depositary receipts plunged more than 90% from $9.35 a share to less than 90 cents.

"What started as a marginal gap between actual operating profit and the one reflected in the books of accounts continued to grow over the years," said Raju. "I am now prepared to subject myself to the laws of the land and face consequences thereof."

Ain't that always the case with these massive frauds? They start out as tiny accounting irregularities or profit shortfalls, yet somehow snowball into major-league financial catastrophes. And it's always right under the nose of a lazy or clueless auditor or regulator. In the case of Enron, Arthur Anderson was asleep at the switch. For Madoff, it was the SEC. In the Satyam scandal, PriceWaterhouseCoopers is now figuring out how it signed off on cooked books.

Furthermore, it's always the guy you least expect behind the really big scams, like Bernie Madoff, the former Nasdaq chairman running a $50 billion Ponzi scheme. In the Raju case, it was one of the founding fathers of Indian IT and a two-time winner of the E&Y Entrepreneur of the Year award.

Not unlike Madoff's ability to draw in high-profile clients, Satyam had its own A-listers who trusted what the company had to offer, including GE (GE Quote), GM (GM Quote), Caterpillar (CAT Quote) and Cisco (CSCO Quote).

"It was like riding a tiger, not knowing how to get off without being eaten," wrote Raju in his confession.

Come to think of it, Raju, being eaten alive might be your just desserts.

Dumb-o-meter score: 95 -- Don't boo-hoo for Raju. Lock him up with Bernie.