Date:07/11/2009 URL: http://www.thehindubusinessline.com/2009/11/07/stories/2009110751851500.htm

Govt can’t help Price Waterhouse on class-action suits in US: Khursheed

– Kamal Narang

The Minister for Corporate Affairs, Mr Salman Khursheed, with (from left) Dr Madhav Mehra, President, World Council for Corporate Governance, UK; Mr Justice Arijit Pasayat, Chairman, Competition Appellate Tribunal; Mr Justice P. N. Bhagwati, Chairman, International Academy of Law; and Mr Dhanendra Kumar, Chairman, Competition Commission of India; at an International conference on competition law, in the Capital on Friday.

Our Bureau

New Delhi, Nov. 6

The Government has ruled out involving itself in the class-action suit that the auditor Price Waterhouse (PW) is facing in the US in the Satyam scam.

“American jurisdiction will decide independently of what we do here. We cannot be of any help to them (PW) in the US. We cannot go and say (to PW) don’t worry we will pay for you,” the Corporate Affairs Minister, Mr Salman Khursheed, told newspersons here on Friday on the sidelines of the ‘International Conference on Competition Law.’

Mr Khursheed did not deny that PW’s officials were seeking the Government’s help in the matter, but added, “If the US jurisdiction decides (that) they have to pay... they have to pay. That’s their problem.”

On PW’s contention that it should not be taken to task for the acts of its partners in the Satyam scam, the Minister said, “They should take that stand there (in the US) and not here.”

On behalf of those who purchased the American Depository Receipts of Satyam during January 2004-09, the US-based law firm Pomerantz Haudek Block Grossman & Gross LLP had filed a class-action suit in February 2009 against the auditors, management and promoters of Satyam in the US District Court, Southern District of New York.

The law firm had said in a statement then that “…PwC was aware of, or recklessly disregarded, a multi-year massive fraud by Satyam management to overstate the company’s earnings and concocting $1 billion of cash that didn’t exist.” Trading in the company’s ADRs was briefly stopped due to the scam, and later the ADRs were trading below $2, a steep fall from the company’s 52-week high of $29.84, the law firm said.

Price Waterhouse, the Indian unit of the global audit major, said it complied with the standard accounting norms when it audited Satyam’s books. But it said its auditing of Satyam could be construed invalid if the statements made by its founder promoter, Mr Ramalinga Raju, in his admission letter on January 7 about the fraud were correct.

Mr Raju had said that Satyam’s financials were incorrect for the previous several years. He admitted to inflating the profit and cash position and understating the liabilities. Two partners of PW have been arrested in India regarding their audits of Satyam.

LISTING OF COMPANIES

A day after the Government asked all profitable PSUs to get listed, Mr Khursheed urged all PSUs and private sector companies to be listed in stock exchanges.

More companies getting listed on the bourses will not only get household savings into the capital market, but also improve the image of India Inc, the Minister said.

The Minister said the Government was committed to notifying Sections 5 and 6 (pertaining to regulations on mergers and acquisitions) of the amended Competition Act. “It is important that the entire (competition) regime is put in place. But there are many issues, both real and imagined on Sections 5 and 6. We are trying to ensure greater consensus and are talking to all stakeholders,” he said.

Industry’s worries include the Act shifting to a mandatory notification regime from the earlier voluntary system. The mandatory regime requires companies entering into M&As and meeting the asset/turnover thresholds specified in the Act, to seek prior approval from CCI. The earlier 90-day timeframe for clearance of M&As by CCI has been enhanced to 210 days in the amended Act. This is considered too long by the industry.