Time to rethink governance - By TT Ram the IIM Professor in ET

I dont really know why they named their comp. as SATYAM. Contray to their real stature.

Why on earth would they want to do that? Over the past month, bewildered investors

and media analysts have been asking the question of
Satyam’s aborted attempt to use
about Rs 7,000 crore in cash to acquire equity in two property companies.

The lack of synergy between the companies, the conflicts of interest, the issue of valuation — all these were so glaring that it was a mystery why a businessman of the stature of B Ramalinga Raju would have attempted such a move.
Well, it’s all falling into place now.

There was no cash pile waiting to be transferred out. It was a fiction created through some incredibly creative accounting. Revenues, profits, reserves, cash were all cooked up over the years leading to an inflation of the balance sheet by around Rs 7,000 crore.

It was becoming difficult to keep up the fiction. That’s where the proposed investment in the two property companies belonging to Raju’s family came in handy. If Rs 7,000 crore could be shown as having been used to finance the acquisition, the gap at Satyam would cease to exist. Of course, Raju’s sons, who ran the property companies, would have received from Satyam a cheque that was worthless. But that’s all in the family, you know.

This is the merest sketch of a story that has the hallmarks of a thriller. It will take a while for investigators to fill out the details. A whole slew of questions will need to be answered. How did the auditors fail to discern any sign of wrongdoing? How did all of it escape the audit committee? If cash of around Rs 7,000 crore was not there, how was it corroborated by bank statements? And so on.

Investor fury over Satyam’s failed attempt at diversification is now giving way to more universal shock and horror over a scandal that could turn out to be India’s own Enron. Following the terrorist attack in Mumbai last month, the incompetence of politicians was contrasted with the supposedly high standards of performance in corporate India. The Satyam affair has now dealt a severe blow to the pristine image of business in post-reform India. As the economic environment worsens, expect more skeletons to come tumbling out.

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Stories that are too good to check

Several Indian newspapers fell victim to a hoax about the arrest near Goa of a supposed Nazi war criminal named ‘Johann Bach’. Apart from the media’s alarming ignorance, the episode also reveals our fascination for unconfirmed news from “intelligence’ sources.

1 July 2008The Hindu

Stories that are too good to check - Siddharth Varadarajan

On Sunday, an email message from ‘Hamman Smit’, press officer from ‘Perus Narpk’ from Shede Road in Berlin arrived in the inbox of several journalists in Goa and Bangalore. The message identified ‘Perus Narpk’ as the “intelligence wing of the German Chancellor’s core” (sic) and claimed credit for the arrest on the Karanataka-Goa border of a fugitive Nazi war criminal named Johann Bach who was responsible for the killing of 12,000 Jews in the ‘Marsha Tikash Whanaab’ concentration camp. The email contained a press release full of outlandish details about the operation, including the claim that the octogenarian Bach had revealed his identity to a holidaying Israeli couple during a rave party in Goa, and had stolen an 18th century piano from a museum in ‘East Berlin’ which he was trying to sell through a local newspaper.

The email was literally full of clues suggesting it was a hoax. The author revealed he was “hamming”, his office was on ‘Shady’ road and the rather un-Germanic ‘Perus Narpk’ was an anagram for ‘Super Prank’. Even if the journalists did not know there was no concentration camp with the name ‘Marsha Tikash Whanaab’, a quick search on the Internet might have at least triggered a warning light. And yet, a number of hacks and their editors rushed to print with this sensational story without bothering to check any of its hilarious details.

The Telegraph ran the story on Monday under the headline ‘Goa piano ‘thief’ found to be Nazi war fugitive’. It quoted “Intelligence Bureau officials” saying that Mr. Bach had come to India via Argentina, Bulgaria and Canada. The story was accompanied by a world map showing how Mr Bach criss-crosed the world before ending up in Goa. The word ‘unconfirmed’ was inserted parenthetically next to Yemen, suggesting that the newspaper had confirmed all other aspects of the story. And how was this terrible criminal caught? The newspaper provided this breathless account: “Goa’s beaches are frequented by young Israeli couples, most of them seeking leisure after a term of compulsory military service in their country. Bach, mistaking the couple for Americans, told them he had “managed” a Nazi concentration camp during the war. The German authorities put two and two together when they realised that the museum from where the piano was stolen was located close to a concentration camp in Berlin. They already knew that the camp was run by a young man named Bach, who was never caught after the war”.

The Indian Express went one step ahead of its competitors with an exclusive detail, noting in its headline that the ‘Nazi war crimninal’ had already been “airlifted to Berlin”. Clearly, if the story was too good for journalists to check, it was too good for the police to deny: “Though local police and intelligence agencies in Karnataka said they were “unaware” of the operation”, the Express noted, “Karnataka Additional DGP for Intelligence, Shankar Bidari, said his office had received information of the arrest on Saturday morning. He also said the alleged war criminal had been moved to Germany.” The only saving grace in the newspaper’s account was its attempt to cross-check the story with the German authorities: “Officials at the German embassy, when contacted, said they had received no information of the arrest in Goa”.

The Deccan Herald, which had all the usual details, also informed its readers that the arrested Nazi was “a brilliant musician like his illustrious 18th Century namesake” and later “rose high in the Nazi hierarchy”. The newspaper also said that Mr. Bach’s whereabouts “have been kept a secret” and that he would be put on trial “at the International Court of Justice, The Hague”. Rediff.com complained about the unhelpful attitude of the Indian police. “Although so much information regarding Bach has surfaced”, it wrote, “both the Karnataka and Goa police continue to opt for the denial mode… The Belgaum police, when questioned as to what Bach was doing in the jungles at Khanapur, said they were unaware of any such arrest.”

This brilliant hoax was the handiwork of ‘Penpricks’ a journalists’ collective in Goa whose blog, is dedicated to discovering “the rotund flanks and the shaggy underbelly of the Goan media. And of course, the rare honest rib”. One of its more celebrated exposes was the debunking of a story run by CNN-IBN about the Russian mafia taking over land in Goa. Penpricks also criticized The Herald for offering to strike a deal for the sale of lead editorials after it posed as a business house interested in positive coverage.

But even if the immediate target of Penpricks was the Goan media, it has succeeded in exposing the underbelly of the Indian media as a whole. Indeed, there is nothing surprising about the hoax receiving such widespread play in the national press. For though the ‘Johann Bach’ story was outlandish, it was no more so than the reports regularly put out by Indian police departments about the arrest of terrorism suspects.

It is easy to laugh at the gullibility of reporters and editors in the ‘Bach’ case but is our profession any less gullible when it uncritically regurgitates improbable, unverified and unverifiable details provided by the police in virtually all terrorism cases? Do any of us ever stop to ask how the police is able to reveal intimate details about a suspect’s prior movements and associations within hours of arresting him? One of the country’s worst kept secrets is that the police admit to having arrested a suspect days and sometimes even weeks after first taking him into custody. During this period of custody, the suspect is worked over and only after there is nothing more to extract is his “arrest” announced to the media. More often than not, the suspect will be paraded before photographers and journalists who will faithfully note down every ‘fact’ provided to them by the police. Some of these ‘facts’ may well be true; but in accepting them at face value, that too from a source whose tendency to distort and mislead is legendary, are we really all that different from the victims of Perus Narpk?