State Farm terminated its contract with the Mumbai outsourcing technology giant Satyam in the latest fallout from the fraud scandal involving the vendor’s chairman, confirmed a spokesperson for the Indian outsourcer. Reuters reports that Satyam would issue a statement later today.
Following admission on January 7 that he had overstated by $1 billion the company’s profits, Satyam’s chairman, Ramalinga Raju, resigned, fueling the Indian government to dissolve Satyam's board and arrest three of its executives. Upon news of the scandal, Satyam’s stock lost 86% of its market value. On Saturday, a six-member board appointed by the government confirmed that it would seek a new chief executive and chief financial officer for India’s fourth largest software services provider.
As reported in by the Associated Press, Satyam employees working for State Farm will stay on for a short period to help with the transition, State Farm spokesman Jeff McCollum told The (Bloomington) Pantagraph. It is estimated that 400 Satyam employees currently involved with information technology projects for the insurance giant will be laid off. "There's a lot of angst about these people because they are friends and co-workers," McCollum was quoted as saying in the Pantagraph. "These people didn't do anything wrong."
News of insurer’s decision dealt a blow to the Hyderabad-based company’s efforts to persuade customers it can fulfill their orders, according to news reports.
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