Company's chair resigns, confessing to having falsified the company's accounts for several years in order to forestall a takeover.B. Ramalinga Raju, chairman of the scandal-plagued Indian outsourcing specialist Satyam Computer Services, has resigned, confessing that he had conspired to cook the firm’s books for several years.In a letter to Satyam’s board, which was released Wednesday morning to the stock exchanges and market regulator, the Securities and Exchange Board of India, Raju owned up to inflating the firm’s cash and bank balances by $1 billion and fudging the firm’s revenues and operating margin in the quarter that ended in September 2008. The actual operating margin was 3% ($12.5 million), on revenues of $434 million, as against the incorrectly reported operating margin of 24% ($133 million), on $554 million in revenues. Debts were overstated by $100 million, and liabilities understated by $253 million. Admitting that the gap in the firm’s balance sheet was caused by inflated profits over several years, Raju stated that he was afraid Satyam’s poor performance would result in a takeover, which would expose the gap (See: ''Scandal-Hit Satyam May Be In Play.'') ''It was like riding a tiger, not knowing how to get off without being eaten,'' his letter read, adding that neither the board nor any of the firm’s executives were party to the wrongdoing. He characterized an aborted deal to buy two construction companies controlled by his relatives, which had riled investors in December, as a last-ditch attempt to substitute fictitious assets with real ones (See: ''Satyam Tries To Make Ammends''.)The confession sent the stock of Satyam Computer Services (nyse: SAY - news - people ) plunging by 138.70 rupees ($2.84), or 77.5%, to 40.25 rupees (82 cents), and pulled down the BSE Sensex 30 index by 749.05 points, or 7.25%, Wednesday. SEBI Chairman C. B. Bhave termed the development one of “horrifying magnitude,'' reported the Press Trust of India. He went on to say that the regulator would take legal action after conferring with the government. The New York Stock Exchange-listed Satyam could face action from the U.S. Securities and Exchange Commission as well.Revelation of the accounting fraud has produced shock waves across India’s corporate world. “This is beyond the realms of my imagination. It’s a real shocker,“ said Rakesh Jhunjhunwala, chairman of the Mumbai investment firm Rare Enterprises. (Jhunjhunwala has no exposure to Satyam.)“I just can’t believe this. It’s very difficult to digest,'' acknowledged Shailesh Haribhakti, executive chairman of audit and consulting firm BDO Haribhakti in Mumbai.Ganesh Natarajan, chairman of the software industry association Nasscom, sought to allay fears that the Satyam fiasco would further damage India’s export-oriented software sector, which has already been dented by the financial meltdown and recession in the United States, its biggest market (See: India's Outsourcers Play Defense.'') ''This is a firm-level issue and won’t affect the entire IT sector,'' he said. “ But it does mean that corporate governance standards overall need to be relooked at with a microscope.''
