At 9.45 on Wednesday morning, a few minutes before the opening bell, SEBI chairman CB Bhave received a mail from the chief of
the troubled IT firm Satyam Computer Services. Raju’s mail was addressed to the directors on the board of his company saying he wanted to “ease the burden on his conscience” by disclosing how the company’s books had been cooked for years.
Over the past few weeks, the regulator had been at work seeking details from the company management and some of the directors on the board who attended the fateful meeting last month when Satyam had announced its plan to invest in two firms connected to the promoters. But on Wednesday morning, the regulator’s immediate instinct was to ascertain whether the communication was genuine, in light of the Pyramid Saimira incident a few days ago. The two major stock exchanges — BSE and NSE — were told to verify the antecedents of the letter.A person privy to the developments on Wednesday said officials who got in touch with Saytam’s company secretary were fobbed off with the reply that he wasn’t aware of anything. But after the regulator insisted, not very gently, the company official approached Mr Raju who confirmed the development, following which a fax was dispatched to SEBI. The stock exchanges were then told to release the information in the public domain.Wednesday’s action was preceded by a visit to the regulatory chief’s office in Mumbai’s business district by senior officials of Satyam’s investment banker, DSP Merrill Lynch. The marque banker, which has handled the overseas equity offering of Satyam, had a mandate to find a suitor for the company. According to a person with knowledge of what happened during the past couple of days, bank officials on Tuesday informed SEBI chief that they were uncomfortable with handling the mandate. They indicated to the regulator that the investment bank was considering walking out of the assignment. It is not yet clear whether DSP Merrill sensed something while carrying out a due diligence exercise on Satyam, which prompted it to go to the regulator.
The Merrill officials were told by the regulator to make a disclosure if they were indeed quitting the assignment, which the investment bank did. Officials in investment banking circles claim that Merrill Lynch discovered serious accounting irregularities in Satyam’s books late Tuesday evening and communicated this to the company’s management.
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