Satyam Computer Services Ltd., the software services exporter embroiled in India’s biggest corporate fraud, agreed to pay $125 million to settle a shareholder lawsuit in federal court in New York.
The agreement, filed yesterday before U.S. District Judge Barbara Jones in Manhattan, resolves litigation in which Satyam had argued U.S. shareholder lawsuits should be dismissed because its home country was the proper venue for the claims. The judge must approve the pact at a hearing to be scheduled later.
“This was a fairly dark cloud of uncertainty that has gone away,” Vineet Nayyar, chairman of Satyam, said in an interview today with Bloomberg UTV. “With this uncertainty gone, it should reinforce client confidence.”
Satyam’s shares plunged 44 percent from Sept. 22 to Nov. 29 after then Chairman Ramalinga Raju revealed an accounting fraud estimated at 100 billion rupees ($2.2 billion) by investigators and resigned. Investors in the U.S. filed at least a dozen class-action lawsuits that were consolidated before Jones.
The company had argued that the case brought by the lead plaintiff, the Mississippi Public Employees’ Retirement System, should be dismissed because it bought shares in India rather than American depositary receipts in the U.S.
Satyam entered into the settlement to “enhance its credibility and business opportunities in the United States market, and eliminate the burden, expense, uncertainty and distraction of further litigation,” according to the filing. The company didn’t admit any wrongdoing in the accord.
Satyam rose as much as 6 percent to 66.50 rupees in Mumbai trading. The shares gained 3.7 percent to 65.05 rupees at 11:19 a.m. local time.
After Raju’s 2009 disclosures, India’s government dismissed the Satyam board and appointed new directors. Tech Mahindra Ltd., the Pune, India-based software company, gained control of Satyam after winning an auction held by a government-nominated board.
Raju was charged with faking invoices, falsifying accounts, inflating the company’s tax liability and understating debt in the fraud. India’s top court cancelled Raju’s bail in October.
PricewaterhouseCoopers LLP and its subsidiaries may be sued by Satyam and the accounting firm was excluded from the settlement, according to the court papers.
“The settlement only resolves claims against Satyam and the claims against other defendants in the action will continue,” the shareholders said.
The case is In re Satyam Computer Services Ltd. Securities Litigation, 09-md-2027, U.S. District Court, Southern District of New York (Manhattan).