February 9, 2009

Sample Survey to verify Satyam Headcount

Filed under: Fiasco, Headcount, Satyam, Scams — Tags: , , — hrcases @ 11:51 am

The Income-Tax department has mobilized a large number of staff members from its local offices for a comprehensive investigation into the fraud in Satyam Computers. The investigations would not be a routine scrutiny but go deep into various issues.

These investigations are basically aimed at finding out how the fraud was committed and where the money was siphoned off.

To verify allegations of fudged headcount, the Income Tax department will do a sample study on 1,000 employees. Based on the address mentioned for the income tax returns filed in the 2007-08 fiscal, the IT officials will visit each house and make inquiries.

A sample of 1,000 employees would be taken up for verification and based on its results further investigations would be done. Though the timing of the study would have a surprise element.

The I-T officials will also verify whether tax deducted at source (TDS) of 53,000 employees was paid as claimed by Ramalinga Raju in his confession. Letters have been sent to different banks to check the genuinity of bank statements filed by Ramalinga Raju and his aides to the department in the tax return filed by them.

Income tax officials said identifying fictitious accounts was difficult based on permanent account number (PAN) as many unknowingly file their tax returns with wrong PAN number. As a result, the Investigation would not be done based on PAN number.

Source: The Times of India group.


February 3, 2009

What is Recession?

Filed under: Depression, Recession — hrcases @ 4:31 pm

A recession begins when there are several quarters of slowing but still positive growth. Experts believe that it is only an “official economic recession” – when the GDP growth is negative for two consecutive quarters or more.

The official agency in charge of declaring that the economy is in a state of recession is the National Bureau of Economic Research. NBER’s defines recession as a “significant decline in economic activity lasting more than a few months”.

A lot of countries at times experience mild economic recessions. This is a built-in factor of societies economic cycle as spending and consumption are going to increase and decrease along with prices.
Experiencing many of these factors simultaneously can evoke deep economic recession or depression.

A recession is primarily caused by the actions taken to control the money supply in the economy. 

The Federal Reserve is responsible for maintaining an ideal balance between money supply, interest rates, and inflation. When The Federal Reserve loses balance in this equation, the economy is forced to correct itself. 

Inflation refers to a general rise in the prices of goods and services over a period of time. The higher the rate of inflation, the smaller the percentage of goods and services that can be purchased with the same amount of money. The reasons can be as varied as increased production costs, higher energy costs and national debt. 

In such a scenario, people tend to cut out leisure spending, reduce overall spending and begin to save more thereby causing the GDP to decline. Unemployment rates rise because companies lay off workers to cut costs. 

Recession can be caused by factors that stunt short term growth in the economy, such as spiking oil prices or war.

An economic recession can usually be spotted before it happens. While the growth in GDP will still be present, one can see higher levels of unemployment, decline in housing prices, decline in the stock market, and business expansion plans being put on hold. When the economy sees extended periods of economic recession, the economy can be referred to as being in an economic depression.

February 2, 2009

‘Scam-hit Satyam unlikely to exist’

Filed under: Fiasco, Satyam, Scams — Tags: , , , — hrcases @ 12:48 pm

Troubles keep mounting for Satyam Computer Services. Some of its top clients namely, Citigroup, Merrill Lynch, Novartis and GlaxoSmithKline are in talks to move their business from the Hyderabad based company to other Indian IT firms.

In the meantime, the number of potential suitors to acquire the beleaguered firm is growing by the day. As many as six companies from the manufacturing, information technology and private equity space have shown interest to buy out the firm. The newly constituted board has narrowed down on a list of three possible candidates for a Chief Executive Officer (CEO) and Chief Financial Officer (CFO), is also mulling providing legal immunity to the new management leadership team from being liable to the previous records of the company.

According to a study by research firm Gartner, the scam-stricken Satyam Computers is unlikely to exist in its current form. It is expected to discontinue some of its businesses, service lines or cease to exist in certain geographies by 2010. The study indicated that even the name Satyam may not exist for long. Satyam’s ability to sign on new clients during 2009 has significantly diminished, says the study. “In addition, it will be challenged to invest in client engagements, staff developments or R&D – all critical elements for IT services,” said Gartner’s Vice President for Research, Frances Karamouzis. For the study, Gartner interviewed representatives of over 30 top Fortune 500 clients of Satyam, 20 top non-Satyam clients, the board of Satyam and CEOs of six tier-I Indian IT firms including TCS, Wipro, Infosys Technologies, Cognizant and HCL.

Gartner believes that Satyam’s ability to regain the trust and credibility has diminished. Satyam has 690 global customers, of which 185 are Fortune 500 companies. A significant number of these clients have already sent some kind of inquiry to other vendors in India. Source: The Times of India group.

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