Outsourcing firm Satyam Computer Services has gone from being India's IT crown jewel, the country's fourth largest company with high-profile customers, to being embroiled in the nation's biggest corporate scandal in living memory.

Ramalinga Raju, the chairman and founder of Satyam, has been arrested and confessed to a £1 billion fraud, admitting he had made up profits for years. According to reports, Raju and his brother B Rama Raju, who was the managing director, hid the deception from the company's board, senior managers and auditors.

Today, a new board, quickly appointed by the government over the weekend, told investors and the media it is working on a rescue plan that includes bringing in new auditors and a new layer of top management with government backing. But the company still has no clean accounting books, nor any idea on the amount of working capital the firm has.

Here is the chain of events leading up to Wednesday's admission.

Dec 16, 2008: Satyam Computers announces it is buying a 100 percent stake in two companies owned by chairman Ramalinga Raju's sons - Maytas Properties and Maytas Infra. The proposed $1.6 billion deal is aborted seven hours later due to a revolt by investors who oppose the takeover. But Satyam shares plunge 55 percent in trading on the New York Stock Exchange.

Dec 23: The World Bank bars Satyam from doing business with the bank's direct contracts for a period of eight years in one of the most severe penalties by a client against an Indian outsourcing company. In a statement, the bank says: "Satyam was declared ineligible for contracts for providing improper benefits to Bank staff and for failing to maintain documentation to support fees charged for its subcontractors." On the day the stock drops a further 13.6 per cent, its lowest in more than four-and-a-half years.


Dec 25: Satyam demands an apology and a full explanation from the World Bank for the statements, which the outsourcer said damaged investor confidence. Interestingly, Satyam does not question the company being barred from contracts, or ask for the revocation of the bar, but instead objects to statements made by bank representatives. It also does not address the charges under which the World Bank said it was making Satyam ineligible for future contracts.

Dec 26: Mangalam Srinivasan, an independent director at Satyam, resigns following the World Bank’s critical statements.

Dec 28: Satyam postpones a board meeting, where it is expected to announce a management shake up, from December 29 to January 10. The move aims to give the group more time to mull options beyond just a possible share buyback. Satyam also appoints Merrill Lynch to review “strategic options to enhance shareholder value”.

Jan 7, 2009: Ramalinga Raju resigns, admitting that the company inflated its financial results. He says the company's cash and bank balance sheet has been inflated and fudged to the tune of Rs 5,040 crore. Other Indian outsourcers rush to assure clients and investors of credibility. Indian IT industry body Nasscom (National Association of Software and Service Companies) jumps to defend the reputation of the Indian IT industry as a whole. "This is a stand-alone case of failure of corporate governance and it is critical that it be viewed in this light," Nasscom said.

Jan 8: Satyam attempts to placate customers and investors that it can keep the company afloat, after its former CEO admitted to India's biggest ever financial scandal. But law firms Izard Nobel and Vianale & Vianale file class action suits on behalf of US shareholders, in the first legal actions taken against the management of Satyam in the wake of the fraud.

Jan 11: The Indian government steps into the Satyam outsourcing scandal and installs three people to a new board in a bid to salvage the firm. The board is comprised Deepak S. Parekh, the executive chairman of home loan lender Housing Development Finance Corporation (HDFC), C. Achuthan, director at the country's National Stock Exchange, and former member of the Securities and Exchange Board of India, and Kiran Karnik, former president of Nasscom.

In a separate scandal, India's third-largest outsourcing company Wipro admitted that it had been blacklisted from bidding for contracts by World Bank for "providing improper benefits to bank staff". The four year bar was issued in June 2007 and will run until 2011. The "improper benefits" allegation centres on a scheme to that allowed family and friends of the bank's CIO and other senior executives to purchase Wipro shares under a programme set up by the company.

Jan 12: The new board at Satyam holds a press conference, where it discloses that it is looking at ways to raise funds for the company and keep it afloat during the crisis. One such method to raise cash could be to ask many of its Triple A-rated clients to make advance payments for services.

Parekh claims this case would not undermine confidence in India's entire IT economy. "This one unfortunate, tragic, colossal case doesn't mean the IT industry as a whole is under a cloud. India is known for its strong, good corporate governance and I don't think that's in doubt."