Ex-Satyam Directors File to Have U.S. Suits Dropped (Update1)

Nov. 17 (Bloomberg) -- Seven former directors of Satyam Computer Services Ltd., including Harvard Business School Professor Krishna Palepu and former dean of the Indian School of Business M. Rammohan Rao, asked that investor lawsuits in the U.S. be dismissed against them.

The suits don’t make specific enough allegations and fail to allege an intent to defraud as required by U.S. securities law, according to court papers filed yesterday.

“The facts pled show no knowledge, awareness in or even notice of any fraud as to any audit committee defendant,” according to the court papers filed in New York federal court.

Satyam’s shares and American depositary receipts plunged after Ramalinga Raju, former chairman of the software-services provider, said Jan. 7 he overstated the company’s assets by $1 billion and resigned. The Hyderabad, India-based company is at the center of India’s biggest corporate-fraud inquiry.

Satyam fell 1 percent to 106 rupees as of 1:16 p.m. in Mumbai trading, extending its losses since Raju’s disclosure to 41 percent. The stock, which plunged as much as 83 percent on Jan. 7, has rebounded after a state-appointed board sold control of the company to smaller rival Tech Mahindra Ltd. in April.

Investors in the U.S. suits, who say Raju’s confession wiped out $4 billion in market capitalization, filed at least a dozen class actions that have been consolidated before U.S. District Judge Barbara Jones in Manhattan. The ex-directors’ filings are in response to the investors’ July 17 consolidated complaint.

Keith Fleischman, a lawyer for the investors at Grant & Eisenhofer PA in New York, didn’t immediately respond to an e- mail for comment sent after New York business hours.

Not Properly Served

Three directors in India -- Rao, V.S. Raju, a former dean of the Indian Institute of Technology, Madras, and T.R. Prasad, a former Indian cabinet secretary -- said they should also be dropped from the litigation because they weren’t properly served with the complaint.

Palepu said he wasn’t on the audit committee during the period of the investors’ allegations. Vinod Dham, another ex- director and former Intel Corp. executive, said the investors didn’t allege he was on the audit committee.

The two other former Satyam directors named in the litigation are Mangalam Srinivasan and Ram Mynampati.

On Nov. 9, Satyam and its former auditors Price Waterhouse and Lovelock & Lewes said the U.S. lawsuits should be dismissed because the litigation belongs in India.

ADRs are issued by U.S. banks to allow investment in non- U.S. companies. Satyam raised $161.9 million from the May 2001 sale of its ADRs.

The case is In re Satyam Computer Services Ltd. Securities Litigation, 09-md-2027, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporter on this story: Thom Weidlich in New York at tweidlich@bloomberg.net.

To contact the editor responsible for this story: David E. Rovella at drovella@bloomberg.net.