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India's WorldCom?

By Gordon Smith, Christine, Hurt, Vic Fleischer, Fred Tung, Lisa Fairfax, David Zaring

Early reports of accounting fraud at Indian outsourcing giant Satyam Computer Services sound eerily familiar:

The final blow came in the past few days. The lenders who had loaned money to Mr. Raju to keep the company running began to sell the pledged shares to meet margin calls, or the forced selling of shares to cover losses.

The leader for the WSJ:

The chairman of one of India's largest information technology companies admitted he concocted key financial results including a fictitious cash balance of more than $1 billion.

10 years ago I was a lowly paralegal, fresh from an abortive career in literature, working on a securities class action against a California chip-maker. I had always thought business was mysterious and impenetrable, and that financial fraud must be sophisticated beyond my ken. It was a revelation that smart, powerful businesspeople occassionally decide that it's a good idea to make numbers up, trusting that "gaps" will close and everything will turn out okay in the end. I may be naive, or even gullible, but my reaction is still, "You really thought no one was going to notice? A billion dollars? Really?"

Full post as published by Conglomerate on January 07, 2009 (boomark / email).