the rise and the fall....

"Satyameva Jayate" (Sanskrit: "Truth Alone Triumphs") is the national motto of India. It is inscribed in Devanagari script at the base of the national emblem, which is an adaptation of the Lion Capital of Asoka at Sarnath, near Varanasi in the north Indian state of Uttar Pradesh. The origin of the motto is a well-known mantra from the mundaka Upanishad.


In context for the last few weeks the apparently senseless news channels are airing their views and presenting sensational (masaladar) takes on the whole event - the common man, the shareholders (well the smaller ones) and the employees are at their wit's end. So where is the truth? Are we actually surveying the real truth or have the so called perpetrators of truth and information decided that stirring up the fragmented pieces of information collected, in a melting pot with bad presentation and weird assumptions would lead to a better selling information piece and higher TRP ratings. And I thought that reporters and news houses were supposed to find and highlight the real truth – at least that’s what my uncle once told me a long time ago.


Well I will & refrain from commenting on the situation that one of the biggest IT vendors in India finds itself today, story but after careful scrutinizing and observing the proceedings I will but just present a spoiler in the making, drawing a hypothesis with the Enron story - one of the most tragic and sinister instances of corporate crime in American history. Well for starters the case of the above mentioned Indian player might be just up there in the Indian perspective.


I did not follow the story well when the news first broke in 2000-2001 but followed it closely in my fourth year of bachelors. By 2002 as far as I remember not only Enron but its accountancy firm Anderson Consulting went bankrupt and some investors of Merrill Lynch were indicted for fraudulent Enron-related business.

Well the story starts in 1985 with the foundation of Enron a traditional energy supply company, by the chairman Mr Lay (Can’t remember his first name !!!) – Enron grew into a "energy commodities” in the late 90’s under the then COO Jefferey Skilling. Under his famous but equally weird “hypothetical future value” policy, Enron started overlooking current losses and started booking non-existent future profits. For e.g. if you took a home loan of say 30 lakhs today in 2009 as a case of financial investment – normal balance statements should indicate today a debt of 30 lakhs. Suppose you sold this house in 2012 for 40 lakhs then Enron in this example would cite a profit of 10 lakhs and book it today i.e. in 2009 itself. (Any resemblance here to the Indian perspective).


One of Enron later CFO’s too played the cards well getting the top investment banks to invest big time in Enron citing false inflated balance sheets – and getting these huge sums to pay off Enron’s debts. Another way was to siphon off debts to sister concerns or subsidiaries or limited liability companies most of which were headed by the top management itself. So the game continued till 2001-02 when the govt. and the investors started taking the P&L sheets seriously and it was matter of time when the truth came out. The management went off with over 100 million USD in bonuses wheres the normal personal were left with 4000 USD as severance package and zero value 401k plans. It must be mentioned that within a short span of time most of top management who had huge shares in the company sold it off wheres the employee’s stock options plans were frozen. Yet another similarity here with the India story.


Well to put it in perspective the govt. put its weight behind Enron throughout – from the Bush presidency to higher circles within the Senate and California – huge projects, deregulation of the electric industry and manipulation of electricity charges – well this would not have been possible without the reality of red tape there. Cut to Hyderabad and Bangalore – huge projects including roadways, metro etc to a particular infrastructure company owned by the chairman could not have been possible without the govt. backing here. Well the apparent merger of the two companies could have fooled the people even more had it gone through smoothly– who knows.


So should we call this a blatant case of corporate “fraudalism” – or is it just a question of timing. Maybe, had the global markets not tanked the Indian corporate romantic story could have continued – this could have emerged even rosier with the kind of respect and market sentiment that the Indian player commanded both globally and in India. Another biggie in the petroleum and natural gas as well as telecommunications industry too commands equal respect though there have been innumerable instances of stories of frauds and corporate deceit surfacing every now and then but never enough to gain speed.


Well some will say that it was a case of actual deceit or simply bad luck. I am sure this is not the first nor will be the last to surface soon. (The news of Nortel tanking just came in….)


It’s said that we don't grow unless we take risks and that any successful company is riddled with failures. Well I hope and pray that that in the long run it does. Somehow my hope goes out to the 50000 odd people and their families that are/were associated in one way or the other with the company.


God bless.

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