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B. Ramalinga Raju, Chairman of the Indian outsourcing specialist Satyam Computer Services, has resigned, confessing that he cooked the firm’s books for several years.

Was this CRISIS IN CREDIBILITY a factor in global equity market weakness today? You bet your Madoff it was!

Raju admitted to grossly inflating Satyam’s cash and bank balances by $1 billion and fudging the firm’s revenues and operating margin in the quarter that ended in September 2008. The actual operating margin was 3% ($12.5 million), on revenues of $434 million. He reported an operating margin of 24% ($133 million), on $554 million in revenues. Debts were overstated by $100 million, and liabilities understated by $253 million.

The confession sent the stock of Satyam Computer Services (NYSE: SAY) plunging by 138.70 rupees ($2.84), or 77.5%, to 40.25 rupees (82 cents), and pulled down the BSE Sensex 30 index by 749.05 points, or 7.25%, today.

In the wake of Madoff, Raju’s actions further erode the credibility of executive leaders and put a black mark on India’s software sector. Raju’s statement that he cooked the books to prevent a take-over of Satyam is not a process, it’s an excuse. Ironically Satyam means “truth” in Sanskrit. This news further adds to our bearish view on India.