Raju claimed in the same letter that “neither he nor the managing director had benefited financially from the inflated revenues, and none of the board members had
any knowledge of the situation in which the company was placed”. The fraud took place to divert company funds into real-estate investment, keep high earnings per share, raise executive compensation, and make huge profits by selling stake at inflated price. The gap in the balance sheet had arisen purely on account of inflated profits over a period that lasted several years starting in April 1999. “What accounted as a marginal gap between actual operating profit and the one reflected in the books of accounts continued to grow over the years. This gap reached unmanageable proportions as company operations grew significantly”, Ragu explained in his letter to the board and shareholders. He went on to explain, “Every attempt to eliminate the gap failed, and the
aborted Maytas acquisition deal was the last attempt to fill the fictitious assets with real ones. But the investors thought it was a brazen attempt to siphon cash out of
Satyam, in which the Raju family held a small stake, into firms the family held tightly”. Table 1 depicts some parts of the Satyam’s fabricated ‘Balance Sheet and Income Statement’ and shows the “difference” between “actual” and “reported” finances.