'India's Enron' Imperils Booming Industry

$1B scandal threatens India's role as major outsourcing center for top companies

By Jim O'Neill, Newser User

Posted Jan 8, 2009 10:26 AM CST

(Newser) – A $1 billion accounting fraud at Satyam is being described as India's Enron, and it could have a major impact on how Fortune 500 companies use Indian companies for outsourcing critical computer and IT functions, reports the Financial Times. The CEO of Satyam, India’s fourth-largest IT services company, resigned yesterday after admitting he added $1 billion in profits over several years.

B. Ramalinga Raju’s confession sent the company into a death spiral yesterday; its share value fell 78%, reports the Wall Street Journal, and its American depository receipts were suspended from trading. Satyam’s major clients included Unilever, Nestlé, Cisco, and GE, and the fact that it was listed in the US could spell major trouble for PricewaterhouseCoopers, the company's auditors.

[Images (4)]

[Quotes (1)]

An employee of Satyam Computer Services Ltd. talks on his phone as he stands on the terrace of the company's office in Bangalore, India, yesterday. (AP Photo/Aijaz Rahi)

This July 21, 2006 file photo shows the chairman of India's Satyam Computer Services Ltd. B. Ramalinga Raju addressing the media in Hyderabad, Indi (AP Photo/Mahesh Kumar A, File)

Founder and Chairman of Satyam Computer B. Ramalinga Raju announces the company's quarterly results during a press conference in Hyderabad, India, Friday, April 20, 2007. (AP Photo/Mahesh Kumar A)

Cisco Systems Inc. chairman and Chief Executive Officer John Chambers, left, listens to Satyam Computer Services Limited chairman and co-founder B Ramalinga Raju during the fuction to inaugurate the Cisco... (AP Photo/Aijaz Rahi)

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It was like riding a tiger, not knowing when to get off without being eaten."
- B. Ramalinga Raju,
Satyam CEO

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'India's Enron' Imperils Booming Industry