Former economic affairs secretary E A S Sarma has written to the Securities and Exchange Board of India questioning the delay in investigating Satyam Computer even after he had alerted the regulator "well in advance" about certain irregularities in the company's books of accounts after the Maytas deal was called off last month.
Coverage: The Satyam fiasco
"This is really a mockery of the system. Sebi had given a clean chit to Satyam a few days ago on the grounds that it found no irregularities in Satyam trying to acquire Maytas Infra. If this is the case, than even the regulators' role is under scanner," Sarma told Business Standard.
According to Sarma, who resigned from the Indian Administrative Service after he was transferred from the finance ministry, the stock market crash of January 8 and a sharp fall in Satyam's share price, which caused significant losses to the investors, could have been avoided had the regulator acted "smartly and promptly".
In two letters dated December 17 and December 18, 2008, Sarma had alerted Sebi about complaints regarding the accounting practices of Satyam Computer that were sent to the ministry of company affairs (MCA) on several occasions earlier.
"I wrote nearly eight letters to Sebi alerting them about Satyam's fraudulent practices and the company's connivance with local politicians but none of the letters elicited any response from the regulator. Sebi remained silent about the issue even while I mentioned to them that MCA launched a fact-finding probe. But the fact is that the MCA probe too was very slow and only on paper," he said.
Sarma says that Satyam had come under the regulatory scanner in August 2002, when there were complaints about the faulty accounting practices.
"There should be a concentrated effort by the government and a single agency should be appointed to probe all the land deals in Andhra Pradesh as majority of them have been through fraudulent means and either Satyam or Maytas have been the beneficiaries," he said.
On Wednesday, Sarma wrote to Sebi saying that "to avoid any further mayhem", the regulator should not delay investigating all the companies which were audited by Price Waterhouse otherwise it will cause a systemic breakdown.