In fact, the Satyam scam is much bigger in absolute magnitude and likely impact. The amount stolen from Enron was Rs 2,866 crores (Rs 28.66 billion) at current exchange rates. In the Satyam case, according to its promoter-chairman B Ramalingam Raju, Rs 7,136 crores (Rs 71.36 billion) were involved. Also greater are the number of defaulting agencies and their failures.

The impact of the Satyam scandal won't be confined to the 53,000 people on its payroll -- a number higher than the 40,000 Enron employees. The entire Information Technology industry will be singed by the swindle just when the global economic slowdown is already hurting it. The World Bank's ban on IT-India's No 3 Wipro [Get Quote], and Megasoft, besides Satyam, for unethical practices will further aggravate the industry's difficulties.

The Satyam swindle has tarnished the image of India's IT industry and cast a shadow over its remarkable 30 percent annual growth, which is generally attributed to virtuousness, brainpower and hard work, not inherited wealth. It has lowered the profile of Andhra Pradesh as a land of gutsy businessmen -- fondly paraded by successive chief ministers as 'Andhra-preneurs' -- who combine a robust native business genius with a modern extrovert outlook.

Above all, the scam has exposed huge cracks in India's corporate governance structures and system of regulation through the Securities and Exchange Board of India, SEBI, ministry of corporate affairs and the Serious Fraud Investigation Office. Unless the entire system is radically overhauled and made publicly accountable, corrupt corporate practices will recur, robbing wealth from the exchequer, public banks and shareholders.

The Andhra Pradesh government has treated Mr Raju with kid gloves. It failed to arrest him for three days after he made a public confession, thus giving him time to sanitise/destroy incriminating evidence. His detention by the state police means that SEBI has been effectively barred from questioning him. This has bred speculation that Mr Raju has cut a political deal under which his family would be protected and certain officials rewarded. The Centre too is preparing to spend Rs 2,000 crores to rescue Satyam and public sector units haven't shifted their IT operations to other companies.

Mr Raju's January 7 confession and surrender to the police should fool no one. Contrary to his earlier claim that 'neither me, nor the managing director (his brother) took even one rupee/dollar from the company...', he now says he has been cooking Satyam's books for seven years.

He is estimated to have made Rs 2,065 crores (Rs 20.65 billion) by artificially jacking up the price of Satyam's shares and selling his holdings (14 percent of the total). Satyam's Chief Finance Officer Vadalamani Srinivas has said the fixed deposits shown in the books were fictitious.

We still don't know the scam's true dimensions. But two things are abundantly clear. First, it's extremely doubtful that Mr Raju inflated Satyam's income by Rs 5,000-plus crores (Rs 50 billion) and even put in Rs 1,230 crores (Rs 12.30 billion) of his own money. It simply doesn't stand to reason that he would do this and not siphon off large sums. Equally dubious is his claim that Satyam's operating margin was as low as 3 percent, compared to the 25 to 30 percent for top-ranking IT companies.

If Satyam's margin was indeed higher, then thousands of crores were spirited out of the company. It is imperative that this trail is rigorously traced. It would be surprising if it doesn't lead to real estate scams or to benami accounts held by politicians. Former Union revenue secretary E A S Sarma, a public-spirited civil servant of exceptional integrity, has tried to find some of these tracks through the Right to Information Act, RTI.

He looked at a private company which is building Gangavaram Port in Andhra and found that 18 percent of its equity is held by Lakeside Investments Ltd, a Mauritius-based company, 'apparently... a smokescreen for tax evasion.' Mr Raju reportedly owns a company with a similar name, Lakeview Investments, and with the same address.

Mr Sarma has also raised serious questions about the way the state has handed out thousands of acres without competitive bidding to Maytas (Satyam spelt backwards) Properties and Maytas Infrastructure. Maytas Infra alone has projects worth Rs 30,000 crores (Rs 300 billion) in Andhra, including the Rs 12,000-crore Hyderabad metro rail and irrigation projects worth Rs 13,000 crores (Rs 130 billion). All this warrants an in-depth investigation.

Secondly, surrendering to the police in India was Mr Raju's best guarantee against extradition to the United States, where numerous criminal cases have been filed against him and where the punishment will be more rigorous and prompt than in India. For instance, Enron's Kenneth Lay was charged on 11 counts and set to be sentenced to 45 years in jail when he died.

If Mr Raju is tried for criminal breach of trust in India, he could get away with as little as three years. Even if he gets a life sentence, he may end up spending 10 years or less in prison.

The Satyam swindle became possible because all supervisory mechanisms failed, including the statutory auditor, PriceWaterhouseCoopers, PwC, independent directors, and SEBI. PwC didn't verify the authenticity of the account-books. It had similarly failed with Global Trust Bank, which collapsed. Irregularities were noted in PwC's handling of Satyam accounts in 2001, but mysteriously, no probe was conducted.

Similarly, a complaint was filed with SEBI by Member of Parliament Ramdas Athavale in 2003. But under political pressure, this was not pursued.

PwC, which has audited Satyam's accounts since 1991, is guilty of grave misconduct and should have faced punitive action from the Institute of Chartered Accounts of India, ICAI. Ironically, PwC has two members in the ICAI disciplinary council!. The council met, but failed to take action against PwC. ICAI, like the Bar Council or Medical Association of India, shields, and rarely acts against, even the most errant of its members.

Satyam's independent directors did no better. They asked no questions about the accounts When the board met last month to approve the scandalous proposal to invest $1.6 billion in Maytas, it didn't even refer to the conflict of interest in buying a company in a completely unrelated business, floated by the promoter. It only went into technicalities of conformity with SEBI guidelines, and valuation of assets. Indeed, one of the independent directors, Krishna Palepu of the Harvard Business School, waxed eloquent on the merits of real estate investment.

These directors collect fat annual fees ranging from Rs 13 lakhs to Rs 92 lakhs (Rs 1.3 million to Rs 9.2 billion) just for attending a few meetings, but clearly lack independence. Many independent directors in India see board memberships as sinecures or lucrative pastimes unrelated to corporate governance and public responsibilities.

Even worse was SEBI's failure to investigate Satyam and refuse to approve its patently foul transactions including the Maytas deal, which was aborted by investor protests. SEBI also ignored a December 18 letter on Satyam sent by Mr Sarma. Other authorities also turned a blind eye to various complaints about the illegal allocation of 17,000 acres of land to Satyam group companies in different cities, in violation of their master plans.

India lacks adequate corporate regulation, and its enforcement is pathetic. For instance, as many as 1,228 of the Bombay Stock Exchange's 4,995 listed companies have failed to submit reports required by Clause 49 of the Listing Agreement, including information on their boards' composition, audit committees, CEO/CFO certification of accounts, and related-party transactions and subsidiary companies.

Corrective action is overdue if corporations are not to cheat stakeholders and the public. Indian capitalism has always had a criminal side to it. Our corporate nabobs often milk their companies by appointing procurement and distribution agents, by under- and over-invoicing imports/exports, evading taxes, indulging in insider trading, and dressing up balance-sheets. Satyam fits this pattern, which is widely prevalent in most brick-and-mortar companies.

Some corrective steps are self-evident. Statutory auditors aren't enough. We need a Board of Audit, which like the Comptroller and Auditor General of India, is authorised to conduct surprise audit on its own or on whistle-blower complaints. Besides, no auditor should be allowed to continue beyond three years.

The government should create a pool of independent directors from amongst citizens of high integrity. Impartial authorities, not company managements, should appoint them and fix their remuneration. Cross-directorships must be banned. All agent appointments must be thoroughly scrutinised. Penalties must be stiffened. The conviction rate in corporate frauds, currently under 5 percent, must be improved.

Breach of trust and fraud must be heavily penalised. If an auditor fails in his duty in India, he faces a ridiculous penalty of Rs 10,000 and maximum imprisonment of 2 years. The US Sarbanes-Oxley Act, passed after the Enron and WorldCom scandals, awards imprisonment for 20 years. The US has greatly improved fraud detection by reforming audit methods and offering incentives to whistle-blowers.

We must learn from all this and acknowledge that deregulation promoted in the name of 'trusting' CEOs and creating a 'favourable investment climate' is dangerous.