India's Satyam head arrested and board scrapped

By Sumeet Chatterjee

HYDERABAD, India (Reuters) - The chairman of Satyam Computer Services was arrested on Friday on charges of cheating and forgery, and the government dissolved the outsourcer's board as authorities moved to limit fallout from India's biggest corporate scandal.

Chairman Ramalinga Raju, who resigned on Wednesday after revealing years of accounting fraud, was expected to appear before India's market regulator on Saturday.

In a late night development, Raju and his brother B. Rama Raju, Satyam co-founder and managing director, were arrested on charges of criminal breach of trust, criminal conspiracy, cheating, falsification of records and forgery, Reuters was told by S.S.P. Yadav, police chief of the southern Andhra Pradesh state, whose capital, Hyderabad, is home to Satyam.

Officials with India's Registrar of Companies searched Satyam's offices and seized papers and electronic documents, the company said late on Friday in a filing with the U.S. Securities and Exchange Commission.

Earlier, Corporate Affairs Minister Prem Chand Gupta said the government would appoint 10 new members to the Satyam board, which would meet within seven days. There was no move at this time to take over Satyam's management, he said.

"The government is considering appointment of suitable persons as directors of Satyam," Gupta told a news conference in New Delhi. "We are determined to reach the truth but are equally concerned with the fate of employees and other stakeholders."

A Satyam spokeswoman said the company welcomed the government's decision, which would restore the confidence of all employees, customers and shareholders. However, she said Satyam had no comment on the arrests.

In a bid to ease investors' concerns, the Securities and Exchange Board of India said auditors' certification of corporate results from the December quarter would be peer reviewed.