Indian market regulator quizzes Satyam founder

HYDERABAD — India's market regulator began questioning Wednesday outsourcing giant Satyam's founder B. Ramalinga Raju over a billion-dollar accounting fraud.

A three-member team from the Securities and Exchange Board of India (Sebi) entered Chanchalguda central jail in the southern high-tech city of Hyderabad to quiz Ramalinga Raju and his younger brother Rama Raju.

It marked the first time the regulator has been able to interrogate Satyam Computer Services' founder and former chief after he declared he had falsified a company bank balance of over one billion dollars and inflated its profits.

Ramalinga Raju surrendered to police last month over the fraud that has shaken by corporate India and is in jail on accusations of cheating, forgery and breach of trust.

Sebi and the government's special fraud team are jointly investigating the scandal, which nearly led to the collapse of India's fourth-largest software exporter, based in Hyderabad.

Sebi officials have already quizzed Satyam's auditors and financial officers and have reviewed details of Satyam's bank deposits, the regulator's chairman C.B. Bhave said last week in India's financial capital Mumbai.

Last month, the public prosecutor in a Hyderabad court alleged Raju had used fake names to divert 200 million rupees (four million dollars) a month from the company's accounts "for his personal wealth".

Prosecutor Gangaraj Prasad alleged police had found evidence of secret business dealings between Raju and a real estate broker.

Raju's defence team, however, said they stood by the confessions made by their client in his original letter to stock exchanges and shareholders -- that he had inflated the company's assets and profits but not for personal gain.

The questioning was taking place as the government-appointed board of Satyam held the first day of a two-day meeting to discuss naming new executives, lining up funding and examining the possibility of selling the company.

Meanwhile the Times of India, quoting unnamed law enforcement officials, reported that the Satyam founder had a taste for high fashion that included a wardrobe of over 1,000 designer suits, 321 pairs of shoes and 310 belts and penchant for expensive watches, bracelets and rings.