Satyam to pay USD 125 mn to settle US fraud litigation

Satyam to pay USD 125 mn to settle US fraud litigation

Mahindra Satyam, formerly known as Satyam Computer Services, on Thursday said it has agreed to pay USD 125 million to settle a clutch of class action suits filed against the company in a United States District Court.

According to Mahindra Satyam Chairman Vineet Nayyer, the amount will be delivered to the plaintiffs once the US Court judge gives final approval to the settlement deal, which may take around four months.

"The USD 125 million will come from cash reserves which are at Rs 2,900 crore at the last count. So we don't see any problem in getting money. The amount will be put in an escrow account in a few days' time," Nayyer said.

"We will have to get the Reserve Bank approval. Once the approval comes from the judge comes, then this money will be transferred to plaintiffs and distributed," he added.

Furthermore, the company will also pay the lead plaintiffs 25 per cent of any net recovery that it may obtain in future from PricewaterhouseCoopers-related entities that helped Satyam Computer founder Ramalinga Raju perpetrate the fraud.

As per a filing to the Bombay Stock Exchange, the settlement is exclusively for and on behalf of the company and does not affect the other defendants to the class action litigation.

According to Nayyer, the company was in negotiations with the plaintiffs for some time and the settlement may end all potential cases in the USA.

After B Ramalinga Raju, the former chairman of Satyam Computer confessed to having fudged the company accounts to the tune of Rs 7,200 crore, the stock of the company nosedived on the New York Stock Exchange, allegedly causing millions of dollars in losses to US investors.

Nayyer said the settlement amount includes lawyer's fees and taxes that may arise out of the payment.

According to a senior official of Mahindra Satyam, there were four lead plaintiffs in USA and one of them acted as the main party for the negotiations.

"All the complainants will have to agree to the settlement terms and no case will be entertained hereafter," the official said.

In December, 2009, Mahindra Satyam settled a lawsuit filed by its former client, Upaid Systems, by paying USD 70 million.

Upaid had filed the lawsuit in a Texas court seeking damages exceeding USD 1 billion.

Though the latest settlement could be the end of the tunnel as far the ongoing legal suits against Mahindra Satyam in the USA are concerned, the company received legal notices in 2009 for claims totalling Rs 1,230.40 crore from as many as 37 companies, which the firm has termed "legally untenable".

In addition, IL&FS Engineering (formerly Maytas Infra) has claimed that it is entitled to a refund of Rs 323.78 crore from Mahindra Satyam.

When asked about a possible out-of-court settlement on these claims, Nayyer had earlier said as far as their records are concerned, these claims are not valid.