Satyam: old lies and new truth or new lie?

This is my fourth post on the Satyam fraud, and what I am concerned about in this post is the willingness of people to believe a liar’s confession blindly. To my cynical mind, the fact that a person admits to have been lying for several years is reason to suspect that what is put forward as the new truth might just be a new lie.

What makes me more suspicious is that the “confession” actually paints the most benign picture possible. What the Satyam Chairman is saying that he never siphoned any money from the company. While many people suspected that Satyam profits were diverted to group companies, the former chairman is saying that the profits were never there. He is also trying to paint the Maytas deal as a last ditch attempt to save Satyam instead of the other way around.

My question is why should we believe all this. How credible is the claim that an IT business with a blue chip client list was not profitable? How credible is the attempt to exonerate everybody else? Should we consider the possibility that the problems were in other group companies of the promoters and that Satyam lost everything while trying to bail them out?

The finance profession is supposed to train one to be skeptical and cynical about everything. The lack of sufficient skepticism and cynicism is itself a cause for concern as it suggests that markets are still too trusting.

Posted at 10:34 am IST on Thu, 8 Jan 2009         permanent link

Categories: corporate governance, fraud, regulation

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