Dreaming Of India: PwC and Satyam

“Everyone in the country had this strange sense of it being too large, too dramatic, too much like a film,” Chandra said.

That same sentiment also exists in Sacred Games. Chandra says that as the novel’s central character unravels a massive conspiracy, he is told that “it’s too ‘filmy’ to be true. If it happens in a movie, it can’t happen in real life.”

Vikram Chandra speaking of his 900-page epic Sacred Games  – a murder mystery with a side plot about terrorists targeting Mumbai.

It’s been two weeks or so since my last update on Price Waterhouse India and their infamous audit client, Satyam.  In that post, I told you how the PWC International Limited Board of Partners was clearly focused on their “matter” in India, even judging by a fairly watered-down set of minutes from their April meeting that was distributed via email to partners worldwide.

The minutes from the June Board meeting have a very different format, with lots of logos and template tricks.


Big title banner in the distinctive PwC typeface all lower case:

inside the boardroom*

news from your US Board of Partners and Principals

The word “litigation” appears three times.  The word “India” not once.

Much more generic than the April report, very few details, no actionable information, only reporting that certain topics were discussed.  Did someone adjust tactics?

In a few cases you can read between the lines…

“Brad Oltmanns, John Carter, and Carol Nebe updated the Board on the Special Committee’s recommendations on how to enable high performance within our partnership through modifications to the partner planning, evaluation and reward system (a.k.a. the “PwC Income System”).

Ruh roh, as Rosie Rott would say.

Sounds like, in addition to the recent comments reporting PwC reductions once the new fiscal year started, it’s now time for PwC to actualize my half tongue-in-cheek prediction of partner layoffs and salary reductions.

In the meantime, there have been several updates and new developments from India. The consensus of those “in the know” is:

“PwC messed up big time.”

1. The Indian government represented by the Corporate Affairs Minister Salman Khurshid said last Friday said that the government will support Mahindra Satyam in resolving class action suits which it is facing in the US.

On the other hand, not only does the Securities and Exchange Board of India (Sebi), which is probing the accounting scam at Satyam Computer Services Ltd, seem to favour prohibiting Price Waterhouse and its arrested partners S. Gopalakrishnan and Srinivas Talluri from auditing any listed Indian firm or intermediary for a “certain period, ” but now SEBI said today that they will fund a domestic investors’ association that has filed a class action suit against Satyam Computers, its former promoters, auditors and directors.

2. Some media reports also suggested that the Institute of Chartered Accountants of India, like SEBI, was ready to recommend not only banning the PW partners but also the firm from auditing in India.  PwC reportedly sent out an internal communication to all its employees dismissing any such possibility. ICAI officials later clarified and said that the CA Act, as it is worded currently, only gives the institute powers to act against individual chartered accountants, not CA firms.

The highlights of the PwC mail are as follows:

  • ICAI cannot ban the firm in India
  • ICAI does not have power to act against firms
  • Newspaper report on banning PW incorrect
  • ICAI can take action only against partners
  • Any action against partners a long process
  • PwC was not contacted by ICAI high powered committee

PwC is yet to hold a single press conference ever since the Satyam scam broke out in early January.

Unfortunately for PwC, one way or the other, it looks like they are heading down the Misuzu, formerly ChuoAoyama Pricewaterhouse/PricewaterhouseCoopers Aarata path I predicted when the scandal first hit.

3. Price Waterhouse partners S. Gopalakrishnan and Srinivas Talluri are still in jail. Their remand is extended again until July 22nd.

4. A team from the US SEC is visiting India next week “to take stock of the progress made so far by the Indian regulatory and investigating agencies in unravelling the Rs 7,000-crore accounting scam.”

5. A reader writes:

Folks in PwC are trying to obfuscate and say that Lovelock & Lewes is riddle and PwC is an enigma both wrapped in a shroud of mystery.

Thank you for blowing up the myth that L&L and PwC are two
different organizations. They are one and the same.

Apart from the various mischiefs committed by the common partners that you have already reported -here is the evidence that partners are running lucrative computer training businesses with politicians. Please go to http://www.iijt.net and then see the section “about us”. You will find that Partha Mitra who has been described as Senior Partner L&L and Partner-in-charge PwC is running a computer training business along with a central council member of the Institute of Chartered Accountants of India and the ex-Finance Minister of India Mr Yashwant Sinha.

Thus the incest lies deep within both the regulator (ICAI) and the
Indian political system. Hence while two of their partners are in
jail no action is being taken against the firm.

Perhaps they got the idea from the President of the AICPA.

6. In the “more problems” department: The Indian Supreme Court on Monday, Jul 13 has handed over a case to the Centre to decide whether to prosecute chartered accountant firm PricewaterhouseCoopers Pvt Ltd for alleged errors in computing its taxable income for 2000-01.

7.  The restatement may take until next March, 15 months after the scandal was uncovered and almost a year after Tech Mahindra bought the company “blind.” It looks like Deloitte has opted out of the process because they may end up auditor of the whole enchilada.

Deloitte, which along with KPMG, had been mandated to restate the accounts of Mahindra Satyam,

is reliably learnt to have opted out of its restating role due to a possible conflict of interest. Deloitte is the statutory auditor for Tech Mahindra — a part of the Mahindra Group that had acquired Satyam Computer — and hence can’t undertake the twin roles, said people close to the development.

Finally, I have identified more examples of potential independence violations on the part of PwC with regard to Satyam like the one I described in the PwC/Idearc/Satyam engagement.

PwC and Satyam have been spending too much time together, in too close quarters, at a number of clients all over the world.  When you add the scandal to the mix, it’s becoming pretty clear that PricewaterhouseCoopers International Limited’s relationship with their audit client Satyam was long and deep and broad and systemic. It went far beyond their audit relationship, surely can be perceived as compromising their audit obligations, and was directed by the highest levels of PwC and PWC IL management for the benefit of their “phoenix from the ashes” consulting practice.

Details on those client engagements in my next post.

Inside photo by by Jehangir Sorabjee taken during Ganesh festival in Mumbai courtesy of this website.

Main photo is the Haji Ali Dargah (Hindi: हाजी अली दरगाह), a mosque and dargah (tomb) located on an islet off the coast of Worli in Mumbai. Lying as it does in the heart of the city, the dargah is one of the most recognizable landmarks of Mumbai. The dargah was built in 1431 by a wealthy Muslim merchant and saint named Haji Ali who renounced all his wordly possessions before making a pilgrimage to Mecca.

17 replies
  1. TC
    TC says:

    FM – Can you clarify the comment regarding partner layoffs. PwC isn’t laying off their professional staff. Why would they lay off partners? Also, which partners would you expect to be laid off? The newer ones, older ones, less technical, the ones that are not rainmakers? How will the decisions be made?

  2. fm
    fm says:


    PwC is cutting professional staff. I know people personally who have been cut, there have been several reports on this blog both in comments and to me off-line of more, and in another development, they decided not to take everyone from BearingPoint they had initially given offers to. Who did they rescind offers to? Everyone on visas, especially people I know from Latin America.

    My point in alluding to the potential for partner cuts and, more likely, adjustments in compensation and performance expectations is based on the explicit, in my mind, reference in the Board of Partners and Principals minutes. They have done it before. I see them significantly reducing Advisory numbers to absorb what they do want from BearingPoint and then struggling for a while even with those reduced numbers. They will do it via “performance” cuts but that is based on chargeability, which is a problem if you have much less big systems integration/implementation and IT Advisory work than you’re touting to the analysts. Their revenue growth in US and globally was worst in Big 4 per Ames Research Group. http://www.amesrgi.com/psmtoday/?cat=6

  3. Sean in DC
    Sean in DC says:


    “It went far beyond their audit relationship, surely can be perceived as compromising their audit obligations, and was directed by the highest levels of PwC and PWC IL management for the benefit of their “phoenix from the ashes” consulting practice.

    Was that, in some way, a reference to Carter?

    So in the grand scheme of things, what do you think this is all going to mean for PwC? You do a great job of referencing the “issues” and saying things that kinda refer to the demise of PwC without offering a solid prediction of what is to come. Is this a way to keep your readers coming back or do you have no real guess as to what is in store of PwC? I am not criticizing you either way, I am just asking if you at least can offer a prediction based on your conversations with PwC partners (who obviously have no problem giving you inside information) or conversations with the managment at other Big4 firms who have a vested interested in the situation?

  4. fm
    fm says:

    @Sean in DC

    Oh, I’ve been pretty open about betting that it will be PwC that’s next. https://francinemckenna.com/2009/05/its-a-race-to-the-finish-but-there-are-no-winners/

    Before I start another round of disagreeable comments saying I just “hate” PwC the most, let me be clear. I have friends and former colleagues and former staff who worked for me at all the firms. In fact I know some who are working their heads off to try and make something of the resources PwC now has in their consulting practice. The demise of any of them would be a tragedy for two reasons: One, it could have been prevented and, two, there is no plan.

    By highest levels of PwC management I meant Duffy, who was the driver and probably the too talkative blowhard at the analyst meeting last July that I cited for its Sataym references. I will be talking about more examples and I am sure he is most likely behind them. And Pujadas and Nally. And to some extent DiPiazza. Carter Pate is nothing. His glory time as a Republican bundler has passed. The firm has to be behind the Goldman Sachs/Obama team now. Pate’s previous involvement with Republicans is a liability not an asset now. Maybe he should move to Deloitte. He will probably disappear when his true colors come out in the wrong place at wrong time.

    And, as I said in a recent post, the match that will light the fire to any of the four firms may come from somewhere that we can’t imagine yet. Lawsuits take a long time and only cost money. There are big ones but any of the firms can probably still handle $1 billion dollars settlement and survive. But can they handle more such as I think it will be for Satyam?

    PwC has plenty of Madoff exposure and it’s growing. There have yet to be anywhere near the number of subprime/financial crisis suits that include the auditors, but they are coming. Bank of America is an accident waiting to happen and AIG still a very lucrative albatross around their neck. And then there could be something coming out of Satyam or another case such as an insider trading case that will involve the government and will force everyone to stand up and take notice because it can not be ignored. None of the firms can handle a criminal indictment.

  5. Sean in DC
    Sean in DC says:

    haha I think saying Carter Pate is nothing is a childing, foolish, and petty statement to make. Everyone is entitled to their opinion, but to make such a childish remark is very surprising, I expect more from you. The whole reason i asked is because he has a book entitle, “The pheonix effect”, which is all about rebuilding struggling businesses.

    You make very interesting points about why PwC will be the next go to. I think similiar arguments could be made about each firm, but PwC, being the biggest, is the most obvious target for litigation and attacks.

    As always, thanks for the input, but, lets keep the personal attacks to a minimum?

  6. fm
    fm says:

    @Sean in DC

    Since Pate is a senior, public leader now and I have met Carter Pate and dealt with him professionally, I am entitled to comment on him personally. What is your knowledge of him? Have you read my post about him?

    But my comment that he is “nothing” was in reference to the PwC/Satyam scandal. I may be mistaken, but he is too new in his role and too insular to have been involved in what I will soon be saying probably really happened.

  7. sean in dc
    sean in dc says:

    I have met carter multiple times in business and social settings. He is extremely bright and a is always thinking about the long term plan. I agree that he most likely did not have that much influence over the actions that you are accusing PwC of, but, to assume this is a risk. You are picked for national roles and told about the promotion that will come long in advance of them actually taking place. I agree you are welcome to your opinions,I just expect more from you than petty comments like “he is nothing”. As the owner of an oft-read blog about a popular field, I would think you would want t
    o save pettiness for personal conversations and give information and opinions that are based on facts.



  8. Anonymous
    Anonymous says:


    “…I have met Carter Pate and dealt with him professionally, I am entitled to comment on him personally.”

    When is it that you met Carter and dealt with him professionally? In your posting on on October 16th, 2008 at 5:42 pm you said,

    “Actually I never met Pate.”

    It is your blog. You’re entitled to comment on whatever you like regardless of how well you know him. Just think you paint with broad brushes sometimes that make your statements incredibly misleading to those that are uninformed. In my opinion, you seek to entertain the disgruntled alumni of the Big 4 rather than inform and educate an industry.

  9. Tenacious Truman
    Tenacious Truman says:

    sean in dc –

    You seem resistant to Fran’s explanation of her comment — and you are clearly misinterpreting what she wrote. (Deliberately so?)

    For the third time: her comment was not a personal attack, but was instead related to her perceptions regarding any role Mr. Pate may have played in the India audit scandal. Yes, she could have been more clear. But a reasonable reading would not lead one to the conclusions you’ve apparently jumped to.

    Also: I think you, like many others, seem to believe that your ideas regarding standards to be applied to a personal blog have relevance. I follow several blogs — this is one of my favorites because of my background — and let me expain to you that your perceptions regarding the “acceptable” level of discourse don’t really apply. As has been posted elsewhere, on this blog as well as other blogs, if you don’t like what you read, you are free to create your own blog where posts are “based on facts” and see how many people visit your site. Do post here to let me and others know when you’re ready for us to visit. I promise to check it out and give you objective and constructive feedback, feedback that is fact-based even though entirely based on my subjective impressions.

    To conclude, you strike me as somebody with a chip on your shoulder, looking to find fault when in fact there isn’t much fault to be found. Best wishes on your blog!

    — Tenacious T.

  10. fm
    fm says:

    @10 Actually I had to go back and really think about whether I had met Carter Pate in person. I know in the comment to my October 2008 post I said I had never met him. After reviewing my notes from my time with PwC in 2005-2006 I believe I did meet him two times and worked on issues he was responsible for during this time. Given his responsibility for the Federal Services Practice, and all of my involvement with them, I feel like I know him very well.

  11. Anonymous
    Anonymous says:


    Thank you for following up and clarifying your relationship with Carter. In my opinion, the context you just provided is valuable. It states why you feel you know Carter well enough to comment, but also gives readers the context to decide if we agree with you.

    As I said, you’re welcome to do what you like with your blog. I, personally, find fact based reporting + your opinion as a commentator infinitely more valuable than just opinions alone.

    Again, thank you.

Trackbacks & Pingbacks

  1. […] the scandal started in January 2009 with Raju’s confession, PwC global leaders have visited numerous times, claimed to be victims themselves, made several appeals to the Indian media including trying to […]

  2. […] the two PwC partners responsible for the Satyam audit were thrown in jail, PwC global leaders visited India numerous times, claimed to be victims themselves, made several appeals to the Indian media including trying to […]

  3. […] the scandal started in January 2009 with Raju’s confession, PwC global leaders have visited numerous times, claimed to be victims themselves, made several appeals to the Indian media including trying to […]

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