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Indian IT scandal boss in custody

10 January 09 18:31 GMT

The founder of scandal-hit Indian software company Satyam is to be held in custody until 23 January, after he admitted falsifying its accounts.

Ramalinga Raju, who said the firm had exaggerated cash reserves by some $1bn (£661m), and his brother Rama have been charged with criminal conspiracy.

Police have also detained Vadlamani Srinivas, Satyam's chief financial officer, for questioning.

The affair is India's biggest-ever corporate fraud.

Mr Raju, formerly chairman, and his brother, formerly managing director, have been charged with criminal conspiracy, forgery, criminal breach of trust and falsifying documents, S.K Kumudi, a senior police officer, said.

They could face life in prison, he added.

Fighting for life

The company, which employs 53,000 people and brought in about $1.73bn last year, is now fighting for its life. Its clients include Nestle, General Electric and Ford.

Satyam is a publicly traded company, but, in exceptional circumstances, the government can step in.

The government said on Saturday that a new board would meet within seven days.

"We are working on the names," Prem Chand Gupta, the Corporate Affairs Minister, told reporters.

Blight?

The scandal comes at a tough time for Indian companies, already hit by the global slowdown and faltering growth in India, one of Asia's tiger economies.

Mr Gupta expressed concern that the affair could blight India's reputation.

"The Satyam case is an aberration," he said. "The credibility of the Indian corporate sector in general, and IT sector in particular, should not be allowed to suffer because of this."

Satyam's shares fell to 11.50 rupees on Friday, their lowest level since March 1998. Last year they hit a high of 544 rupees.

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