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Mumbai/New Delhi, Jan. 8 Two US-based law firms - Izard Nobel LLP and Vianale & Vianale LLP - have filed ‘class action’ lawsuits against scam-hit Satyam Computer Services on behalf of investors who purchased the American Depository Receipts (ADRs) of the Hyderabad-based company between January 6, 2004 and January 6, 2009.

The lawsuit has been filed at the behest of Ms Aekta Ben Patel, a non-resident Indian in US.

A class action or a representative action is a form of lawsuit where a large group of people collectively bring a claim to court.

In two separate news releases sent today, both law firms have charged that the IT major and its top executives violated the Section 10(b) and 20 (a) of the Securities Exchange Act of 1934 by issuing materially false and misleading statements.

According to corporate lawyers, even the independent board directors of Satyam, including the ones who have tendered their resignation, could be sued under this act. According to them, even the statutory auditor for Satyam Computer Services, Price Waterhouse could be sued.

On January 7, Satyam’s Founder-Chairman, Mr B. Ramalinga Raju, sent a letter to the Satyam Board of Directors and the Securities & Exchange Board of India acknowledging a Rs 7,000-crore fraud in which Satyam’s financial accounts and disclosures were systematically falsified. As a result of this disclosure, the company’s ADRs fell by $8.42, or 90 per cent to $ 0.85 on Wednesday. Subsequently, the New York Stock Exchange suspended trading in Satyam’s ADRs.

“This could just be the beginning; customers from potentially every geography could file law suits against the company. One must bear in mind that many of the dealings that clients have had with Satyam were on the basis of Satyam’s numbers, which now we know, have been fudged over the years,” said a senior Delhi-based corporate lawyer. Satyam has more than 600 clients globally of which 150 are in Europe alone.

“In case there is punitive action against the company in US in a class action suit, then the company directors located in the US will face action. Also, the directors in India, if need be, could be extradited,” Ms Manali Singhal, corporate lawyer, said.

When contacted, Mr Kenneth J Vianale told Business Line on phone from the US that the complainant in this case is Ms Aekta Ben Patil, who lives in Florida. “Since last night, we have received over 100s of calls…People are upset, they are disgusted…Many of them thought that the company was solid as a rock.”

Asked about the next course of action, Mr Vianale said, “In the next 60 days, the shareholders can make a motion, and the court will decide who is to be appointed as the lead plaintiff. Typically, the investor, who suffers the biggest loss in Satyam stock, will be the lead plaintiff,” he said.

“We do not know the extent of damages yet. Overall, the ADRs represent only 20 per cent of the equity of the company, and so the damages could be relatively reduced” Mr Vianale added.

More Stories on : Software | Corporate Governance | Courts/Legal Issues | Economic Offences | Satyam Computer Services Ltd

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