Senior Advisor to Faust To Appeal Indian Court Guilty Verdict

Business School professor Krishna G. Palepu said that he will appeal an Indian court’s ruling that found him guilty of failing to obtain government approval for fees he charged for consulting services provided to Satyam Computer Services.

The ruling, announced Monday, ordered that Palepu pay a fine of 2.66 crore rupees, or about $430,000, according to the American Bazaar, an amount Palepu said represented excessive compensation he received from the company.

Palepu was tapped in early 2012 as University President Drew G. Faust's senior advisor for gloabal strategy. He has also served as a senior associate dean at the Business School.

The ruling against Palepu was one of a number of other verdicts announced Monday as part of one installation of legal proceedings surrounding Satyam Computer Services, a top Indian outsourcing company that in 2009 was accused of engaging in falsification of its accounts. In the investigations that followed, India’s Serious Fraud Investigation Office filed complaints stating that Palepu failed to obtain government approval for the work he did at Satyam.

Palepu said that the money in dispute represents a discrepancy in the way the compensation he received from the company was filed, not a fine for misdoing. After exceeding a certain cap on compensation, independent directors of Indian companies must receive government approval, he said.

“The dispute is not about the money being legitimately earned—the dispute is about whether the company has done the paperwork properly or not,” Palepu said.

Though the ruling signals guilt on Palepu’s part, he maintains that he complied with regulations, making the information about the work he did public to shareholders.

He said the current ruling improperly targets him, citing a U.S. federal judge’s decision to dismiss shareholders' lawsuits against the directors of the company. Palepu wrote in an email Thursday that he was an independent director at Satyam from 2003 to 2005, and subsequently a non-executive director until he stepped down in 2008.

In the appeals process, Palepu aims to address what he calls an unfair verdict.

“My lawyer advised me very strongly that we will prevail on appeal,” he said.

The investigations that led to this week’s ruling are part of a broader corporate fraud case, one of the largest in India’s history. In 2009, B. Ramalinga Raju, Satyam’s chairman, admitted to falsifying the accounts of the company, inflating its earnings and assets, according to The New York Times. In his disclosure, Raju admitted that the company did not have 50.4 billion rupees, or $1.04 billion, of the 53.6 billion rupees it listed as assets in the second quarter of Indian fiscal year 2008.

Palepu said that he played an integral role in exposing the scandal. After he received a whistleblowing email, he brought the fraudulence to the attention of the company’s board, he said.

“I did more than my job to bring the problem to light,” he said.

—Staff writer Andrew M. Duehren can be reached at aduehren@college.harvard.edu.