The chairman of India’s Satyam Computer Services was taken into judicial custody until January 23, his lawyer said on Saturday, as authorities try to unravel India’s biggest corporate scandal.
Ramalinga Raju and his brother B. Rama Raju, Satyam’s co-founder and managing director, were arrested late on Friday on charges of criminal breach of trust, criminal conspiracy, cheating, falsification of records and forgery.
“He has been sent to judicial custody until January 23,” S. Bharat Kumar, Ramalinga Raju’s lawyer, told reporters outside a magistrate’s residence in the southern city of Hyderabad.
His brother was also remanded until January 23, and both will be held at the city’s Chanchalguda jail.
According to Kumar, the magistrate said Ramalinga Raju’s health was to be monitored after he said his client was not well. Kumar added he would file a bail application on Monday.
Hyderabad police said later they had also arrested the company’s chief financial officer, Vadlamani Srinivas, and were questioning him.
“The charges against him are criminal conspiracy, cheating and forgery of accounts,” said V.S.K. Kaumudi, the city’s Inspector General of Police. “We are not planning to arrest anybody else right now,” he added.
The Indian government said it was working on selecting a new 10-member board for Satyam, after it dissolved the outsourcers’ board on Friday before a planned Saturday meeting.
Chairman and founder Raju resigned on Wednesday after revealing years of accounting fraud at Satyam, including an admission that about $1 billion, or 94 percent of the cash and bank balances on Satyam’s books at end-September, did not exist.
Stand-in Chief Executive Ram Mynampati said the scandal had pushed the company into a crisis of unimaginable proportions.
Satyam’s market value has shriveled to $330 million at Friday’s close from more than $7 billion six months ago.
On Saturday, Corporate Affairs Minister Prem Chand Gupta said the composition of the new board was still to be finalized.
“We are working on the names,” Gupta told reporters in New Delhi.
After dissolving the previous board on Friday, Gupta said the new 10-member board would meet within seven days but added there was no move to take over Satyam’s management.
On Saturday, Gupta said the government had received a letter from Lazard about representation on the new board and it was being looked into.
Lazard’s lawyer told television station CNBC TV18 that Lazard was Satyam’s largest shareholder and wanted a seat on the board. The TV station said Lazard had a 7.4 percent stake.
Stock exchange data showed that Lazard Asset Management held a 2.15 percent stake in Satyam as at September 30, 2008.
“Now that the government has decided to appoint a new board, then we would like the government to consult us on the appointment of the members to the board,” Hitesh Jain, Lazard’s lawyer, told CNBC TV18, adding it also wanted to be consulted about other steps the government wanted to take on Satyam.
Several securities fraud class action lawsuits have been filed in the United States on behalf of investors who bought Satyam American Depository Receipts (ADRs) in the last five years.
Hyderabad-based Satyam specializes in business software and back-office services for clients including General Electric and Nestle.