Everybody’s A Crook: Satyam, Wipro, Insurance Cos … who’s next?

Let me get this straight, less than a week after Satyam implodes, the World Bank releases a list of companies that are barred from doing business with the Bank, and Wipro is on the list.

Which brings me back to the point I’ve been making all this while — Satyam isn’t unique. And while a bunch of people are trying to make the case that the only reason Satyam had such a low profit margin was because Raju was siphoning money, I fear that its spin. Before I make my case, here’s another major piece of news — it seems the American insurance industry is full of lying, crooked shills. NBC reports:

The New York attorney general’s office launched an investigation after receiving hundreds of complaints about Oxford Insurance and its parent company, UnitedHealth Group, which claims to rely on “independent research from across the health care industry” to determine reimbursement rates. In actuality though, it relies on Ingenix, a research firm owned by UnitedHealth Group.

New York Attorney General Andrew Cuomo says Ingenix has been manipulating the numbers so insurance companies pay less. In a just-released report, he contends that Americans have been “under-reimbursed to the tune of at least hundreds of millions of dollars.” Although UnitedHealth Group and Oxford Insurance were the only entities investigated, other major insurers use Ingenix, including Aetna, CIGNA and WellPoint/Empire BlueCross BlueShield.

The story talks about how this could be a more widespread problem and the insurance companies in the US could have swindled patients out of millions of dollars over many, many years.

I think it all boils down to how people make money. The owner of Satyam, or any other publicly traded company, does not get insanely rich when the company’s revenues go up. He gets stinking rich when the share price goes up, and he can either borrow money using it as co-lateral, or sell it and bank it. (The other option is to siphon money and head for the Cayman islands. If Raju had siphoned off anywhere close to Rs 5000 crore, he’d be living in a little chalet of an island.)

Ideally, generating greater revenue should be directly linked to share prices. In reality, companies don’t go around exposing their bank balance. They pay auditors to rubber stamp a piece of paper with a bunch of numbers on it.

If the widespread fraud in American insurance industry is revealed, be prepared for another round of that wonderfully macabre economic parlour game: crash, boom, bang, and bailout-to-nowhere. Which of course spells bad news for the media. Almost every company is overleveraged, overvalued and overstaffed.

Recovered from the site’s WordPress archive, where it was published on 2009-01-14.