PwC arm moves Sebi to settle Satyam fraud case

Mumbai: Price Waterhouse (PW), one of the leading auditing firms in India, has moved a consent plea with markets regulator Sebi to settle the investigations relating to its role in the eight-year-old Rs 8,000-crore Satyam Computer Services fraud. The consent plea has been filed under a rule change that came into effect in February this year. A consent plea is an application moved by an entity being investigated by the regulator to settle a case of alleged wrongdoing with or without admitting any such violation.

In 2009, PW — an arm of the global consulting and auditing major PricewaterhouseCoopers (PwC) — had filed the first consent plea with Sebi, which was rejected by the regulatory body.

Sebi is investigating the role of the auditing firm, Price Waterhouse Bangalore, which worked for Satyam between 2000 and 2008. The regulator is probing whether two PW partners played a role in concealing the scam, which was unearthed when Satyam founder B Ramalinga Raju, through letters to the bourses, admitted to fudging the books for years.

PW moved the regulator last week to reach a settlement. A PW spokesperson confirmed the development, while Sebi, according to its rules, did not comment on ongoing investigations relating to a regulated entity.

“Price Waterhouse firms in India have initiated consent proceedings with Sebi as we are exploring all possible options to bring this matter to a close, which has been pending since 2009 (relating to the audit of Satyam Computer Services). The avenue to settle proceedings is offered as part of the normal Sebi procedures, governed by Sebi’s Settlement of Administrative and Civil Proceedings,” a spokesperson for Price Waterhouse firms in India said.

Sources said the latest consent application has been filed under a recently-amended rule, Regulation 5, which says “……provided that such an application maybe considered in exceptional circumstances such as the lapse of time since the commission of the alleged default, the weight of evidence against the applicant, etc”. According to a source, this recent amendment to Sebi’s consent regulation supersedes all earlier regulations and governs the present consent application. This is the first time an audit firm filed an application under the changed rules.

“Since this could be a precedent-setting move, one hopes that Sebi’s decision will carry enough heft to act as a deterrent in the future,” Shriram Subramanian, MD, InGovern Research Services, an advisory firm on corporate governance, said.

After the Satyam fraud was out in the open in early 2009, Sebi had issued show-cause notices to PW and some of its partners and associates and subsequently started an investigation against those entities. The regulator’s main objectives were to prove fraud or connivance of the PW’s partners with the promoters of Satyam in fudging the company’s books. Subsequently, PW moved the Supreme Court, challenging Sebi’s jurisdiction and authority in starting an investigation against the audit firm. The apex court, however, allowed Sebi to go ahead with its investigations against PW.

Earlier this year, Sebi received a six-month extension from the SC to complete its investigations. Last month, it obtained another six-month extension. As part of its investigations, during May-June this year, Sebi officials had met up with officials from PW.

Link: Times of India – 9 Sep 2017