The Chief Financial Officer of India’s Satyam Computer Services was arrested, Hyderabad police said on Saturday, as authorities seek to unravel India’s biggest corporate scandal.
”We have arrested the CFO and we are questioning him now,” said V.S.K. Kaumudi, Inspector General of Police in Hyderabad, southern India.
”The charges against him are criminal conspiracy, cheating and forgery of accounts,” he said.
”We are not planning to arrest anybody else right now, at least for the moment,” Mr Kaumudi said.
The former chairman and the chief executive of Satyam Computer Services, the outsourcing company at the centre of a $1bn fraud, were arrested Friday night.
B. Ramalinga Raju, Satyam’s former chairman and its founder, was detained on charges of cheating and forgery. B. Rama Raju, his brother and co-founder, was arrested on charges of criminal breach of trust, criminal conspiracy, cheating, falsification of records and forgery, police said.
The arrests came as the scandal afflicting India’s fourth largest outsourcing company threatened to create contagion in the stock market, with investors selling off property stocks in Mumbai and other companies.
Earlier, Prem Chand Gupta, minister for corporate affairs, said he had dissolved Satyam’s board and would appoint new directors who would meet within a week.
The move headed off a plan by the board to hold a meeting on Saturday to appoint a new auditor and an investment bank to explore a sale of the company. The Securities and Exchange Board of India, the stock market regulator, was also expected to quiz Ramalinga Raju on Saturday.
The co-ordinated action by the authorities comes three days after the former chairman wrote to the board confessing to manipulating the company’s accounts over years in a fraud valued at more than $1bn.
The government has faced heavy criticism for its delayed response to the scandal, which is being described as “India’s Enron” and is threatening confidence in the country’s information technology outsourcing industry.
There was as yet no word on whether the government was contemplating acting against the company’s auditor, PwC.
Mr Raju had resigned on Wednesday and along with his brother, B. Rama Raju, chief executive, and Srinivas Vadlamani, chief financial officer, has not been seen in public since.
There were frenzied scenes outside the Andhra Pradesh state police headquarters in Hyderabad late on Friday night as reporters jostled to get a view into any car coming into the complex in the expectation the brothers were about to be brought in.
SS Yadav, the state director general of police, told the Financial Times by telephone: “Mr Ramalinga Raju and Mr Rama Raju are being arrested.”
He gave no further details.
Satyam shares fell as much as 71 per cent in early trade after the market reopened after a public holiday on Thursday before closing down 40.3 per cent at Rs23.85.
The drop compounded a near 80 per cent fall on Wednesday, which gave Satyam a market value of about $330m against $7bn six months ago.