Satyam bosses to exit
By Bala Shah

It was just a question of time before the recent turmoil in Satyam claimed the heads of the managers responsible for it.  The latest shady Satyam tactics were to allow its Chairman Raja and a coterie of senior Directors and managers to move US 1.6 billion dollars out of Satyam and into other family controlled companies. The shareholder outcry forced Satyam to backtrack.

Senior managers have now told techgoss that Satyam founder and Chairman Ramalinga Raju will be sacked on Dec 29th.  Officially, Raju has ‘resigned’ and the Board will ‘accept’ it, but the reality is that everyone in Satyam is keen on saying goodbye to Raju.  While Raju had done a lot for Satyam in the past, more recently it had become a personal fiefdom not run by the disciplines of modern Indian companies like Infosys. 

In all this uncertainty, Satyam shares are taking a beating.

News cannot get any worse for Satyam.  Fox News in USA is reporting that the World Bank has blacklisted Satyam for 8 years for trying to bribe some staff.  But the World Bank case is not closed and the US Government may still initiate other legal action against Satyam.  Satyam started providing tech services to the World Bank in 2003, but was soon facing allegations of trying to bribe key staff and planting spyware in the US premises which allowed their India offices to monitor confidential information in USA.

Techgoss has also learnt that many senior managers like CFO and Global Head of Corporate Governance will be resigning soon.  In fact any manager too closely associated with the Mr. Raju and the Upaid case will be asked to leave soon.

(Techgoss had run the following story on Dec 20, 2008)

Shady Satyam tactics
By Bala Shah

Maytas is Satyman spelt backwards.  And both are in the critical glare of public and shareholder spotlight this week for a business deal that only served the interests of a handful of people.  SEBI may initiate a Government investigation into the Satyam $1.6 billion dollar investment into family owned Maytas. The Raju family, which controls both Satyam and Maytas, would have mainly benefited from this deal.

In the face of international criticism, Satyam stopped the deal.  But at great cost to its credibility.  Expect some heads to roll soon.

Many commentators felt this was an attempt by the Raju family to move funds from the IT Sector (Satyam) to Real Estate (Maytas) to enrich family members.

But the reality is that the Raju family may have planned this to strip Satyam of its funds before a court case in USA orders it to pay more than $1 billion in compensation to British company Upaid.  Upaid has sued Satyam in the USA and all the signs are that it has a solid case of fraud, forgery and breach of contract against Satyam. Currently Satyam has enough funds to pay any court-ordered compensation.

Upaid, like a shark which has sensed blood, continues gnawing at Satyam. Now Upaid has moved court seeking the testimony of Satyam managers in the Maytas deal.  All attempts by Upaid seeking depositions by Satyam Chairman B Ramalinga Raju, Chief Financial Officer Srinivas Vadlamani and Global Head of Corporate Governance, G Jayaraman, have been resisted by Satyam.  A deposition is like giving evidence in court and any lies can result in imprisonment.  What does Satyam have to hide?

Indian blog SpicyIP can be credited with breaking the Upaid court case against Satyman as early as January 2008.  Indian newspapers and TV stations only picked up the story much later.

Yesterday, SpicyIP had another scoop when it reported that Satyam has filed a court case in USA of ‘disparagement’ against Upaid.   Put simply, this means that it is alleging that Upaid was responsible for actions and comments that caused commercial loss to Satyam.  For some reason best known to it, Satyam did not make a public announcement about this court case. Once again, what does Satyam have to hide?

(Techgoss had run the following story on Nov 11, 2008)

NASSCOM to testify
By Bala Shah

Early in the year, we had reported how British company Upaid has sued Satyam for hundreds of millions of dollars in a complicated legal case which would be decided by US Courts.  Essentially, Unpaid is suing Satyam for providing it forged documents which were used to get patents in USA.  Satyam, on its part, says it always did the right thing and will defend its innocence in court.

Last month, respected Indian IP website SPICY IP reported that Upaid has upgraded its complaint against Satyam in the Texan courts which will decide this multi-million dollar case.  The amended complaint against Satyam was filed in October, but the American court has sealed the documents.  But Spicy IP reports that courts rarely keep private such documents and the revised complaint may be made public soon.

Today, SPICY IP is reporting that almost a dozen fresh forgeries have allegedly emerged in Satyam’s dealings over the past several years, which very likely places the Indian software giant in some difficulty.  Upaid has filed an application to compel the deposition of at least four high-ranking Satyam officials which include MD and co-founder B Rama Raju and CFO Srinivas Vadlamani.

SPICY IP is also reporting that NASSCOM has been dragged into the case.  Upaid has convinced the American court to take the written deposition of the National Association of Software and Services Companies (NASSCOM). Upaid wants NASSCOM to clarify its position on its code of conduct regarding intellectual property and if Satyam worked within that framework.

Legal cases are about law and strategy.  What would Saytam MD and CFO say is court?  Or would they settle outside the court to avoid a grueling legal interrogation?  It should be an interesting few months.

SPICY IP article is recommended reading.

(Techgoss had run the following story on Oct 27, 2008)

Satyam sued update
By Bala Shah

Early in the year, we had reported how British company Upaid has sued Satyam for hundreds of millions of dollars in a complicated legal case which would be decided by US Courts.  Essentially,  Unpaid is suing Satyam for providing it forged documents which were used to get patents in USA.  Satyam, on its part,  says it always did the right thing and will defend its innocence in court.

Now respected Indian IP website SPICY IP  is reporting that Upaid has upgraded its complaint against Satyam in the Texan courts which will decide this multi-million dollar case.  The amended complaint against Satyam was filed this month but the American court has  sealed the documents.  But Spicy IP reports that courts rarely keep private such documents and the revised complaint may be made public soon.

There will be a jury trial in June 2009.  Depending on what the wise men and women of the jury decide,  the damages could run into hundreds of millions of dollars.

(Techgoss had run the following story on June 4, 2008)

Satyam sued for billion$
By Bala Shah

Will Indian tech major Satyam be forced to pay hundreds of millions in a complicated legal case which will culminate in Jan, 2009?  So far, the courts have not been kind to Satyam with one of the highest courts in UK ruling against it, and awarding costs to UK-based Company UPAID which is suing Satyam.

It all started in 1996 when Upaid worked out an idea and business plan to enable every telephone to be used as a pay phone using a PIN and prepaid account. Satyam was hired at a cost of approx 8 million dollars over 4 years to develop the infrastructure/software for Upaid.

This is where the first mistake was made by both parties.  No watertight legal document was signed to ensure that Upaid, as the originator of the idea, has complete intellectual property ownership.

Two years later, when Upaid went to apply to patent rights in USA, it needed documents from Satyam confirming that Upaid and not Satyam had all such rights. After long deliberations such an agreement was signed with a clause that if Upaid did not pay Satyam for the development and support of the software, the IP would revert to Satyam.

The alliance became closer with Satyam buying equity in Upaid and even placing a Satyam employee on its board of directors.

Complicated, is it not?

Soon the friendship between Satyam and Upaid soured.  There were allegations of quality of work, non-payment of dues and that the Satyam man on Upaid Board was promoting Satyam rather than Upaid.

By 2002, divorce proceedings were being worked out.  Satyam and Upaid signed a settlement agreement under the jurisdiction of UK courts.

By 2005, Upaid sued two American companies in Texas, USA for violating their patents.  At this American court it was revealed that some of the documentation that Satyam gave Upaid handing over IP rights was forged.  At least one Indian and ex-Satyam employee told the American court that the signature on the Satyam documents was not his.

Upaid was shocked to realize that some of its patent applications had been made on forged documents.  It sued Satyam in a court in Texas, USA.

Satyam, in turn filed a case in UK, saying that the court case should be heard in UK not USA.  Last week, the English courts ruled against Satyam even ordering them to pay costs.  According to sources in the industry just the legal fees in UK could be as high as US 100,000 dollars. 

Yesterday, Upaid told Business Standard that they are increasing their scope of their legal case against Satyam and believe that they could be awarded damages for as much as one billion US dollars.

Satyam continues to insist that it has done nothing wrong.

Techgoss can only speculate that all this may have happened because Satyam may have been in a hurry to wash their hands off Upaid.  And with the turnover of employees, it may not have been practical to get the signatures of all Satyam employees forsaking their rights, and handing over the IP to Upaid.  Little could anyone in Satyam have realized that this would come to bite them badly.

Having said that, this is only speculation at this point in time.  Only a judicial court can determine what really happened.  And whether it was more than an administrative error or worse.

Will Upaid ever get a billion dollars?  Probably no, but may be awarded damages for tens of millions of dollars if the American courts find Satyam guilty of forgery.  Even as we speak,  Satyam and Upaid may be in negotiations for an out of court settlement. 

If there is anything good that will come out of this is that in the future every company outsourcing to India will insist on proper IP documentation.  And quietly in the background,  hidden from public and media scrutiny,  a number would Indian tech companies would be fixing such mistakes in all the deals signed in the past.

What is also interesting is that all the Indian media reports are tip toeing around the central allegations that people have testified in court that documentation was forged.  Satyam is a formidable force in South India and not many tech journalists would risk being black listed by them.  Only a few local newspapers in Andhra Pradesh,  home of Satyam,  have thought this newsworthy enough to report to their readers.

Techgoss note:  Respected Indian blog //spicyipindia.blogspot.com was the first in India to pick up the story and report it in a way that made sense to people with no legal backgrounds.  The Spicyipindia story by Sumathi Chandrashekaran was soon picked up by national media like Times of India and DNA and now Business Standard.

But this was certainly another case where the new media of blogs picked up an idea and set high standards for others to follow. 

http://spicyipindia.blogspot.com/2008/06/spicyip-tidbits-satyam-vs-upaid-redux.html