UPDATE 2-India's Satyam, PwC settle SEC probes into fraud

* Satyam to pay $10 mln in SEC accord

* PwC in record settlements with SEC, PCAOB audit group

* Billion-dollar fraud known as India's Enron (Adds background, details, PwC comment, byline)

By Jonathan Stempel

NEW YORK, April 5 (Reuters) - Satyam Computer Services Ltd and its former auditor PricewaterhouseCoopers agreed to pay a combined $17.5 million to settle U.S. probes into an accounting fraud that in 2009 became India's biggest corporate scandal.

Satyam, an outsourcing company now known as Mahindra Satyam Ltd (SATY.BO), will pay $10 million to settle U.S. Securities and Exchange Commission charges it fraudulently inflated revenue, income and cash balances by more than $1 billion over five years.

Separately, India-based affiliates of PwC agreed to pay $7.5 million in record settlements of related charges by the SEC and the Public Company Accounting Oversight Board.

The SEC called its $6 million accord with five PwC affiliates its largest involving a foreign-based accounting firm, while the PCAOB said the $1.5 million payment by two of those affiliates represents its largest civil money penalty.

Satyam founder and former chairman Ramalinga Raju surprised investors in January 2009 when he said the company had overstated earnings and assets for several years, in a fraud sometimes called "India's Enron." [nSGE71D02W] [nSGE6AP0AX]

That revelation caused shares of the software servicing company to plummet. Satyam agreed in February to pay $125 million to settle U.S. shareholder litigation over that decline. [ID:nN16244922]

"The fact that Satyam's former top officers were able to maintain a fraud of this scale represents a company-wide failure of extreme proportions," Cheryl Scarboro, chief of the SEC's foreign corrupt practices act unit, said in a statement.

The PwC units in India, she added, "failed to conduct even the most fundamental audit procedures."

LEARNING LESSONS

In accepting the SEC settlement, Satyam did not admit wrongdoing and agreed to improve training and internal audits. PwC affiliates agreed not to accept new U.S.-based clients for six months, and also agreed to improve training and auditing.

Lawrence West, a Latham & Watkins LLP partner representing Satyam, did not immediately return a call seeking comment.

PwC said it also did not admit wrongdoing in agreeing to settle the U.S. regulatory proceedings. "PW India has learned the lessons of Satyam," Dennis Nally, chairman of PricewaterhouseCoopers International, said in a statement.

The PCAOB was created under the Sarbanes-Oxley Act of 2002 to oversee the audits of public companies. Sarbanes-Oxley became law in the wake of Enron's collapse the prior year.

Once India's fourth-largest outsourcing company, Mahindra Satyam in September posted a net loss of 1.3 billion rupees for the fiscal year ended the previous March. It was the first time it had revealed financial results since the scandal.

Raju surrendered to Indian authorities in November after his bail was canceled. [nSGE6A90M8] (Reporting by Jonathan Stempel in New York; Additional reporting by Sarah N. Lynch in Washington, D.C.; editing by Andre Grenon, Dave Zimmerman)