Former Satyam Chairman Arrested

By Omer Farooq

Hyderabad, India -- Indian police on Friday arrested B. Ramalinga Raju, the founder and former chairman of beleaguered outsourcing giant Satyam Computer (SAY Quote), days after he admitted he doctored the company's accounts to the tune of $1 billion.

Satyam's balance sheets were riddled with "fictitious" assets and "nonexistent" cash that could no longer be concealed after a deal intended to save the struggling company was abandoned, Raju admitted Wednesday in a letter to the company's board.

Raju and his brother, former managing director B. Rama Raju were arrested in the southern city of Hyderabad, according to S.S. Yadav, the top police official of Andhra Pradesh state where the company is headquartered. Hyderabad is the capital of Andhra Pradesh.

The brothers resigned their posts in the company Wednesday.

Yadav said the men were being investigated for cheating, forgery, criminal breach of trust and falsifying documents. They may face up to 10 years in prison, he said.

Several investors in Satyam were considering suing PricewaterhouseCoopers LLC, the auditor of the company's doctored accounts, an attorney said Friday.

Satyam shares fell another 45.5% Friday to 21.75 rupees in Mumbai, following an 80% plunge Wednesday. Trading was closed Thursday because of a holiday.

"PricewaterhouseCoopers would be responsible in certain circumstances. I mean they are supposed to check on the accounts and their audit report is relied upon by various people," said Ravi Nath, a lawyer with the Rajinder Narain law firm, which has been contacted by several investors intending to sue the auditor. "On my first impression, PricewaterhouseCoopers needs to answer a few things."