IDG News Service - Law firms Izard Nobel LLP and Vianale & Vianale LLP have filed class-action lawsuits in the U.S. on behalf of investors who hold American Depositary Receipts (ADR) for shares of India-based outsourcer Satyam Computer Services Ltd., which is embroiled in an accounting scandal.
The lawsuits are among the first legal actions taken against Satyam, whose now-former chairman acknowledged this week that management had fiddled with the company's accounting to overstate profits. ADRs are U.S.-listed securities, issued by depositary banks, that represent shares in a foreign company.
The Securities and Exchange Board of India, that country's securities regulator, has ordered an investigation into Satyam's financial accounting activities, but no legal action beyond that has been taken in India thus far. And today is a public holiday in India on account of a religious festival.
B. Ramalinga Raju, Satyam's chairman, admitted on Wednesday in a letter to the Bombay Stock Exchange that the company had inflated its profits and cash holdings for several years.
Raju also resigned from his job at Satyam, and his current whereabouts are unknown, a spokeswoman for the company said today. Local media reports in India have speculated that Raju may have gone abroad, with a variety of possible locations cited, including Dubai.
The lawsuits by Hartford, Conn.-based Izard Nobel and Boca Raton, Fla.-based Vianale & Vianale were filed separately in U.S. District Court in New York. Both complaints charge that Satyam and certain company executives violated federal securities laws by issuing materially false and misleading statements.
What happens next to Satyam isn't clear.
After Raju's letter to the stock exchange became public on Wednesday, Ram Mynampati, another senior Satyam executive, took charge as interim CEO. He is scheduled to hold his first press conference later today at Satyam headquarters in Hyderabad.
A meeting of Satyam's board will be held as scheduled on Saturday, the company spokeswoman said. In addition to the accounting scandal, the meeting will likely address the issue of expanding the board, which has been whittled down by the recent resignations of a number of its members.
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