UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK In re: 09 MD 2027 (BSJ) (Consolidated Action) SATYAM COMPUTER SERVICES LTD. SECURITIES LITIGATION JURY TRIAL DEMANDED This Document Applies to: All Cases CONSOLIDATED CLASS ACTION COMPLAINT BERNSTEIN LITOWITZ BERGER & GRANT & EISENHOFER P.A. GROSSMANN LLP Jay W. Eisenhofer Max W. Berger Keith M. Fleischman Steven B. Singer Deborah A. Elman Noam Mandel 485 Lexington Ave., 29th Floor Michael Petrusic New York, New York 10017 1285 Avenue of the Americas, 38th Floor Tel: (646) 722-8500 New York, NY 10019 Fax: (646) 722-8501 Tel: (212) 554-1400 Fax: (212) 554-1444 Co-Lead Counsel for Plaintiffs Co-Lead Counsel for Plaintiffs BARROWAY TOPAZ KESSLER LABATON SUCHAROW LLP MELTZER & CHECK, LLP Lawrence A. Sucharow David Kessler Christopher J. Keller Sean M. Handler Louis Gottlieb Sharan Nirmul 140 Broadway 280 King of Prussia Road New York, NY 10005 Radnor, PA 19087 Tel: (212) 907-0700 Tel: (610) 667-7706 Fax: (212) 818-0477 Fax: (610) 667-7056 Co-Lead Counsel for Plaintiffs Co-Lead Counsel for Plaintiffs TABLE OF CONTENTS Page I. SUMMARY OF THE ACTION ......................................................................................... 2 II. JURISDICTION & VENUE............................................................................................... 6 III. PARTIES AND RELEVANT NON-PARTIES.................................................................. 7 A. Lead Plaintiffs..................................................................................................................... 7 B. Additional Named Plaintiff................................................................................................. 9 C. Satyam................................................................................................................................. 9 D. The Officer Defendants..................................................................................................... 10 E. The Maytas Defendants..................................................................................................... 11 F. PricewaterhouseCoopers Defendants................................................................................ 13 G. The Audit Committee/Director Defendants ...................................................................... 17 H. Securities Act Additional Defendants............................................................................... 20 I. Relevant Non-Parties......................................................................................................... 20 IV. DEFENDANTS’ FRAUDULENT SCHEME.................................................................. 23 A. Defendants Fabricate Invoices for Nonexistent Customer Projects.................................. 30 B. Defendants Forge a Paper Trail to Conceal and Legitimize the False Proceeds of Nonexistent Customer Contracts....................................................................................... 33 C. Defendants Establish Companies to Acquire Land Using Satyam Cash .......................... 35 D. Defendants Arrange Secret Loans to Satyam To Fill The Company’s Cash Void........... 37 E. The Rajus Cash In On Their Misconduct.......................................................................... 39 V. PWC’S ROLE IN THE FRAUDULENT SCHEME ........................................................ 41 A. PwC India Had Actual Knowledge of Satyam’s Fictitious Cash Balances and Overstated Cash Flows and Knowingly and Actively Engaged in Fraudulent Conduct .. 44 B. PwC India Profited Handsomely from its Role in the Fraudulent Scheme....................... 44 C. PwC India Ignored Red Flags ........................................................................................... 45 D. PwC India’s Audit Procedures Were Inadequate and Not in Accordance with GAAS.... 47 (a) PwC India Failed to Obtain Reasonable Assurance that the Financial Statements were Free from Material Misstatement Caused by Fraud......................................... 50 (b) PwC India Failed to Adequately Plan Its Audit, Did Not Understand Satyam’s Accounting Processes, and Failed to Assess the Nature of Satyam’s Business ....... 52 (c) PwC India Failed to Obtain Sufficient Competent Evidential Matter ...................... 53 E. PwC International Controlled PwC India.......................................................................... 53 VI. THE AUDIT COMMITTEE DEFENDANTS RECKLESSLY CAUSE SATYAM TO ISSUE FALSE AND MISLEADING STATEMENTS.................................................... 58 VII. FALSE AND MISLEADING STATEMENTS................................................................ 64 A. Defendants Fraudulently Inflated Satyam’s Revenues and Related Operational Data..... 68 B. Defendants Fraudulently Inflated the Value and Extent of Satyam’s Assets ................... 71 C. Defendants Fraudulently Concealed Related Party Loans and Satyam’s True Level of Indebtedness...................................................................................................................... 74 D. Defendants Fraudulently Inflated the Number of Satyam Employees and Their Utilization Rates................................................................................................................ 75 E. Defendants’ False and Misleading Sarbanes-Oxley Certifications................................... 77 F. Defendants Condition and Artificially Inflate the Marketplace for Satyam Ordinary Shares and ADSs Through Their Fraudulent Portrayal of the Company.......................... 77 G. PwC Issued False and Misleading Audit Reports ............................................................. 81 VIII. THE TRUTH IS REVEALED/PARTIAL DISCLOSURES ............................................ 82 IX. ADDITIONAL ALLEGATIONS OF SCIENTER........................................................... 86 X. PLAINTIFFS ARE ENTITLED TO A PRESUMPTION OF RELIANCE ..................... 88 XI. THE STATUTORY SAFE HARBOR IS NOT AVAILABLE TO THESE DEFENDANTS................................................................................................................. 91 XII. ALLEGATIONS CONCERNING THE CLAIMS ON BEHALF OF PLAINTIFF BRIAN F. ADAMS AND THE SATYAM EMPLOYEE STOCK OPTIONS SUB- CLASSES.......................................................................................................................... 93 XIII. CLASS ACTION ALLEGATIONS................................................................................. 95 XIV. CLAIMS FOR RELIEF .................................................................................................. 100 XV. JURY TRIAL DEMAND ............................................................................................... 119 XVI. PRAYER FOR RELIEF.................................................................................................. 119 Lead Plaintiffs, Public Employees’ Retirement System of Mississippi, Mineworkers’ Pension Scheme, SKAGEN AS, and Sampension KP Livsforsikring A/S, bring this securities class action on behalf of themselves and all other persons or entities, except the Defendants and their affiliates, who (a) purchased or otherwise acquired Satyam Computer Services Limited (“Satyam” or “the Company”) American Depositary Shares (“ADSs”) on the New York Stock Exchange (“NYSE”); and/or (b) were investors residing in the United States who purchased or otherwise acquired Satyam common stock on the National Stock Exchange of India (“NSE”) or the Bombay Stock Exchange (“BSE”) between January 6, 2004 and January 6, 2009 (the “Class Period”), and who were damaged by the conduct alleged herein. This action is also brought on behalf of two sub-classes of Satyam employees who received and exercised stock options during the Class Period pursuant to Satyam employee option plans further detailed herein. Lead Plaintiffs, by their undersigned attorneys, allege the following upon personal knowledge as to themselves and their own acts, and upon information and belief as to all other matters. Lead Plaintiffs have derived substantial evidence supporting the allegations herein based on their investigation (made by and through their attorneys), which included, among other things, a review and analysis of: (1) public documents pertaining to the Defendants named herein; (2) Satyam’s filings with the Securities and Exchange Commission (“SEC”), Indian Ministry of Corporate Affairs & Registrar of Companies and the Securities and Exchange Board of India; (3) press releases or other public statements published or made by Satyam or the other Defendants; (4) analyst reports concerning the Company; (5) pleadings and witness statements in other litigations where Satyam or any of the other Defendants named in this case are defendants, including criminal proceedings pending in India; (6) interviews with former employees of the corporate Defendants named herein; (7) media coverage regarding Satyam, its business, or any of the other Defendants named in this action; and (8) consultation with economic and accounting experts. Many of the facts supporting the allegations contained herein are known only to the Defendants or are exclusively within their custody and/or control. Lead Plaintiffs believe that further substantial evidentiary support will exist for the allegations in this Complaint after a reasonable opportunity for discovery. I. SUMMARY OF THE ACTION 1. Satyam is an Indian information technology (“IT”) outsourcing company that was, until recently, believed to be the fourth largest IT