The "inappropriate" conduct of one of the new economy's standard-bearers is now a topic of primetime television.

The World Bank earlier this week debarred Satyam Computer Services  from applying for contracts with it for eight years. The ostensible reason for the punitive action was Satyam’s involvement in the bribing of bank staff for favours.

A furious Satyam demanded an apology, but the World Bank instead has reiterated its decision. World Bank spokesman Carl Hanlon reportedly said, "The Bank stands by the statement issued on its India website on 23rd December."

The World Bank Indian website has issued the statement: "In order to correct erroneous press reports, the Bank has confirmed that it declared Satyam ineligible to receive direct contracts from the World Bank under its corporate procurement program for a period of eight years. Satyam was declared ineligible for contracts for providing improper benefits to Bank staff and for failing to maintain documentation to support fees charged for its subcontractors. The Bank's decision was effective in September 2008 and followed a temporary suspension that took effect in February 2008."

It adds, "There is no evidence that Satyam was involved in malicious attacks on the Bank’s information systems."

There are some lingering questions that need answers. The last part of the statement is ambiguous. And, as for the question of "improper benefits", what are the grounds for the decision? Is there incontrovertible evidence against the company?  Is it purely circumstantial, or does the bank possess substantial evidence? 

In 2007, the World Bank administrative tribunal found that the World Bank’s former vice-president, Mohamed Muhasin, had purchased shares of Satyam on preferential terms. Muhasin was close to Satyam as he used to head the bank's information solutions group.

Muhasin was never tried in a court of law. It was unclear if he was the beneficiary of Satyam’s American Depository Receipts’ (ADR) private placement, or of preferential allotment of its Indian equities.

The law requires shareholders’ approval for preferential allotment of shares or ADRs. If Muhasin was allotted preferential shares or ADRS, was the approval of the Satyam board or shareholder secured? It is unclear whether such a request was made by the management of Satyam. X
 

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Satyam hits back at world bank, demands apology