By Nate Raymond
NEW YORK, Jan 2 (Reuters) - A U.S. federal judge dismissed
claims against seven former directors of Satyam Computer
Services Ltd in shareholder lawsuits stemming from the massive
fraud at the heart of India's largest corporate scandal.
U.S. District Judge Barbara Jones in New York ruled on
Wednesday the lawsuits failed to allege that the ex-directors
recklessly failed to discover the fraud, which came to be known
as "India's Enron."
The lawsuits center on the revelation by Satyam's founder
and former chairman, Ramalinga Raju, that what had been India's
fourth-largest outsourcing firm had for several years inflated
its revenue, income and cash balances by more than $1 billion.
In her decision Wednesday, Jones said the allegations
primarily focused on the actions of a small group of insiders,
reinforcing an inference the audit committee's members "were
themselves victims of the fraud."
Lawyers for the directors welcomed the decision.
"It was truly unfortunate that these directors, diligent
individuals of the highest integrity, were ever named as
defendants," said Irwin Warren, a lawyer for five of the seven
directors involved in the case.
Gordon Atkinson, a lawyer for former board member Vinod
Dham, in an email said the decision would hopefully help
vindicate his client and the other outside directors, "who were
themselves victims of the Satyam fraud, not perpetrators or
otherwise responsible for it."
Lawyers for the plaintiffs did not respond to requests for
Satyam shareholders began filing lawsuits in 2009 after the
In 2011 Satyam, now called Mahindra Satyam Ltd, and its
auditor, PricewaterhouseCoopers, agreed to pay $125 million and
$25.5 million, respectively, to settle claims filed by
That same year, Satyam and PwC agreed to pay a combined
$17.5 million to settle claims made by the U.S. Securities and
Exchange Commission and Public Company Accounting Oversight
The 2011 settlements did not include Satyam's former
directors, who continued to litigate the case that ultimately
ended in Wednesday's ruling.
In her ruling, Jones also said the investors could not file
claims arising from stock purchases made on the National Stock
Exchange of India, citing a 2010 U.S. Supreme Court case
restricting investor claims in U.S. courts involving stocks
bought on overseas exchanges.
Investors had also filed claims involving Satyam American
depositary shares, which were not impacted by the Supreme Court
The lead plaintiffs include Public Employees' Retirement
System of Mississippi, Mineworkers' Pension Scheme, SKAGEN AS
and Sampension KP Livsforsikring A/S.
Jones also dismissed claims brought by a former Satyam
employee on behalf of employees who exercised stock options. The
judge also voided claims on jurisdictional grounds against two
companies owned by the Raju family - Maytas Infra Ltd. and
Adam Finkel, a lawyer for Maytas Properties, in an email
said his clients were pleased with the decision.
The case is In re Satyam Computer Services Ltd. Securities
Litigation, U.S. District Court, Southern District of New York,
For the plaintiffs: Co-lead counsel for plaintiffs: Max
Berger, Bernstein Litowitz Berger & Grossman; David Kessler, Kessler Topaz
Meltzer & Check; Jay Eisenhofer, Grant & Eisenhofer; and Joel
Bernstein, Lawrence Sucharow.
For defendants Mangalam Srinivasan, Ram Mynampati, V.S.
Raju, T.R. Prasad and M. Rammohan Rao: Irwin Warren, Weil, Gotshal &
For Vinod Dham: Gordon Atkinson, Cooley.
For Krishna Palepu: Jeffrey Jacobson, Debevoise &
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