$1Bn Scam Spotlights Promoters

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Byline: RICHARD ORANGE

TO most international businessmen out here, the $1 billion Satyam scam, though shocking in its scale, will hardly be surprising.

At the very first corporate do I attended here, I met a recently arrived British managing director who was seriously unnerved, not so much that potential Indian partners admitted bribing politicians, but that several bragged about how many they had in their pockets.

Corruption is endemic in India, but the accounting and corporate governance regime has been one of the brighter spots. The role of "the promoter" in the Satyam affair makes me suspect it won't be alone, however.

Promoters company founders like Satyam's Ramalingam Raju sometimes have only a minority stake in their main listed company. But they wield effective control, often appointing relatives to key positions, and building dizzying networks of holding companies.

It's not too hard to siphon money out of one "promoter company" and into a more lucrative business, returning it six months later and pocketing the profits.

Until last year, doing so would have been very rewarding.

Over the last six to 12 months, however, equities and property, popular ways to make a quick buck, have collapsed in value. …