'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
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)
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(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.