Raju & Madoff - Tale of Two Scams

While Satyam founder flounders in Indian jail, Wall Street fraudster stays in penthouse home


By Zhen Ming


IT was only last week that Mr Ramalinga Raju - the 54-year-old founder of giant Indian software company Satyam - was enjoying a lifestyle befitting his US$1.3 billion ($1.9billion) fortune.

Over the weekend, however, Mr Raju got thrown into jail in the Indian city of Hyderabad - after admitting that he had orchestrated the country's biggest corporate fraud.

It was a swindle worth at least US$1b, and Mr Raju admitted that he had wildly inflated Satyam's profitability and assets for years.

Halfway around the world, Bernard Madoff, a 70-year-old Wall Street money manager turned self-confessed Ponzi-style swindler, has been allowed bail while awaiting trial.

Mr Madoff has already admitted to stealing as much as US$50b. If so, that would make him the biggest fraudster in global financial history.

Yet, on Monday, a US district judge ruled that Mr Madoff could still remain under house arrest in his penthouse apartment on the Upper East Side of Manhattan.

Today, while Mr Raju languishes in an overcrowded Indian jail, Mr Madoff is probably lounging in his living room watching news about himself on his flat-screen TV.

This, despite Mr Madoff having sent 16 watches (including diamond-encrusted timepieces from Tiffany and Cartier), four diamond brooches and an emerald ring to family and friends.

This, despite him having some 100 signed checks worth US$173 million lying around in his desk ready to be given to others.

To be sure, any American without Mr Madoff's bank account (or influence) would surely be locked up in jail by now.

'What a crock,' said an irate ABC News user in a website posting. 'If I went downtown and shoplifted a loaf of bread, I'd be in jail quicker than you can think... And Bernie goes off smirking at the American people.'

Double standards

Welcome, critics say, to America's supposedly two-tiered justice system - one for the very rich, the other for ordinary Joe six-packs.

In the US, wealthy white-collar crooks like Martha Stewart and Bernard Ebbers have found clever ways of staying out of prison until trial (typically by posting huge bonds).

Astonishingly, despite his own self-admission, Mr Madoff hasn't been charged yet.

What's more, his own sons have remained mum about how they could have worked at their father's firm for decades without noticing that the money he supposedly managed did not exist.

In India, when the Satyam fraud was unveiled last Wednesday, the country's benchmark Sensex index fell by 7.25 per cent in one session - a steeper drop than that which followed the Mumbai terror attacks in Nov.

Aghast institutional investors are seeking compensation in India and in the US, where several class-action suits have been filed.

As of Friday, Satyam was valued at only US$330m as compared to its market worth of more than US$7b six months ago. In other words, Satyam investors will probably recover less than five cents for each dollar invested.

But for Madoff investors, the prospect of getting back their US$50 billion is much bleaker - at the last count, what's left is only two cents for each dollar invested.


Source: The New Paper, Fri 16 Jan 2009