Satyam agrees to pay $125 mn to settle US suits

Mumbai: Mahindra Satyam (formerly Satyam Computer Services) has agreed to pay $125 million to settle a clutch of class action suits filed against the company in a US District Court, arising from an accounting fraud that in 2009 turned into India’s biggest corporate scandal. The settlement does not cover various individuals including Ramalinga Raju, the company’s founder and former chairman, according to settlement papers filed in the US district court in Manhattan.

Raju shocked investors in January 2009 when he said Satyam -- which was then listed on the New York Stock Exchange after an ADR issue -- had overstated earnings and assets for several years, in a fraud estimated around Rs 7,000 crore. Raju's revelation caused Satyam shares to plummet on the NYSE, leading to several lawsuits in the US.

"The settlement is subject to the approval of the court and may be terminated prior to court approval pursuant to the grounds for termination set forth in the Settlement. If the settlement is approved by the court, in exchange for the settlement consideration, the lead plaintiffs and the members of the class who do not opt-out of the class, would release, among other things, their claims against the company," it said.

The obligations incurred pursuant to the settlement are in full and final disposition of the action with respect to the released parties and any and all released claims, it said in a notice to Indian stock exchanges.
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It said this settlement does not cover the "Aberdeen Action in the same court, wherein a trustee of two trusts, who are assignees of the claims of twenty investors, sought recovery from the company". However, the investors who have assigned the claim to the two trusts are entitled to participate in the proceeds of the settlement.

"We will have to get the Reserve Bank approval. Once the approval comes from the judge comes, then this money will be transferred to plaintiffs and distributed," the company said. Furthermore, the company will also pay the lead plaintiffs 25 per cent of any net recovery that it may obtain in future from PricewaterhouseCoopers-related entities that helped Ramalinga Raju perpetrate the fraud.

The settlement is exclusively for and on behalf of the company and does not affect the other defendants to the class action litigation. The company was in negotiations with the plaintiffs for some time and the settlement may end all potential cases in the US.

"The $125 million will come from cash reserves which are at Rs 2,900 crore at the last count," a company official said.