Update One: Upaid was granted leave by the Texas Federal Court to file its third amended complaint in the case.
The amended complaint remains under seal, but the order clearly makes reference to the Racketeer Influenced and Corrupt Organisations Act (the RICO Act), suggesting that the amended complaint contains fresh charges under this law against Satyam.
Slightly unrelated to the blog, but of general interest: RICO allows criminal penalties and also permits civil causes of action to be brought against individuals found guilty of “racketeering”. Criminal penalties include imprisonment for 20 years, and a fine of USD 25,000, and civil penalties include the awarding of treble damages to the affected party. RICO was historically used against the US Mafia, but later widened in scope to apply across the board to a variety of offences, including white collar crimes, and most recently the Catholic Church! At any rate, under the Act, RICO specifically makes unlawful as activities by any person, persons or organization:
1. Using income derived from a pattern of racketeering activity to acquire an interest in an enterprise;
2. Acquiring or maintaining an interest in an enterprise through a pattern of racketeering activity;
3. Conducting the affairs of an enterprise through a pattern of racketeering activity;
4. Conspiring to commit any of those offenses.
It will be interesting to see how things pan out under the new allegations, which are additional to all previous charges in the case. Note that I have not seen the amended complaint, and am only aware that there are charges under RICO. I do not know the exact nature of the charges, nor do I have details of whom these charges are directed against.
Update Two: The court also allowed Upaid’s motion to take deposition from NASSCOM. This motion had been filed several months earlier, as reported here in some detail. You may recall the nature of the questions that have been put to NASSCOM, in its position as the premier trade body and voice of the software and services industry in India.
Specific questions relate to:
- codes of conduct established by NASSCOM.
- industry customs with regard to the protection, sale and transfer of intellectual property.
- Whether NASSCOM’s Quality Forum (designed to help Indian companies achieve next generation leadership in quality) assists Satyam etc achieve best practices that meet strong IP protection requirements.
I’m sounding a bit of a whiner now, but it’s obvious that Satyam is not the only issue in this questionnaire. Upaid appears to be drawing attention to the IT sector as a whole, and its practices, or lack of, relating to IP, etc. The broad suggestion seems to be that India needs to clean up its act if it wants software/IT business coming in, and advertise that its industry is clean.
A development that may affect NASSCOM’s response to this questionnaire/request for deposition is the appointment of Kiran Karnik to the new Board of Directors of Satyam. A bit of background: Karnik, in his former capacity as NASSCOM President, had been contacted twice in 2007 by Upaid for informal discussions on these very issues, i.e., of Satyam’s alleged misdemeanours in IP transfer, as well as potential systemic problems that may exist in the IT industry in India. However, Karnik had apparently failed to respond in any measure to the queries, leaving the discussion hanging. No subsequent informal discussion was broached, until the present motion in court.
Karnik’s current appointment is a strategic move to keep the stakeholders in India’s software industry still interested in the business. So far, so good. At the same time, the government of India has consistently maintained that the Satyam case is a one-off. But, as I have suggested earlier, this may be just a case of brushing things under the carpet and ignoring the larger picture of tackling practices in the IT industry as a whole. There have been some spectacular performers in the industry, and while one likes to believe that all of this glory was won with professionalism and integrity, it would be prudent to “run a check on that”, just so that the bubble doesn’t burst again.
Update Three/Four/and beyond: The court decided on a bunch of issues in the cases all at one go, and I’m trying to put together as many of the relevant ones as possible: Upaid was allowed its motion to compel the testimony of current and former senior executives of Satyam (including B Ramalinga Raju and S Vadlamani). The ‘discovery’ period in the case was extended till the end of April. But Satyam’s request for a 90-day continuance, i.e., to delay trial proceedings by a month-and-a-half, was denied. As of now, the trial dates remain status quo: Satyam will face a jury in a Federal Court in Texas on June 1, 2009.
Open Question: There are over half a dozen potential buyers for Satyam as I write this, and perhaps more ’round the bend. Whichever buyer succeeds will definitely wrangle for limited legal liability at the time of purchase. Does this heighten, or reduce, the odds of arriving at an out-of-court settlement? I am sitting on the fence on this one. Answers welcome.
