GURGAON: Reebok India on Tuesday lodged a first information report (FIR) with Gurgaon Police alleging that its

former managing director Subhinder Singh Prem and COO Vishnu Bhagat had "stolen" products by setting up "secret warehouses", fudged accounts and indulged in fictitious sales to cause a Rs 8,700 crore dent to the company. If the allegations are found correct, this would be the second biggest corporate scandal after Satyam, where Ramalinga Raju is accused of orchestrating a Rs 14,000 crore fraud. In regulatory filings on May 1, Adidas, which owns the Reebok brand, had said that commercial irregularities in India had forced it to take a Rs 870 crore hit in addition to restructuring spend of Rs 470 crore planned in 2012. Reebok India's turnover is estimated at around Rs 600 crore.

In the FIR filed with the Sector 40 police station in Gurgaon, Reebok said that it carried an internal investigation after certain "fraudulent activities" were noticed in January this year. When contacted, both Prem and Bhagat refused comment saying they were unaware of the FIR. India director (finance) Shahin Padath has alleged in the FIR that Prem and Bhagat, whose services have since been terminated, had set up four secret warehouses in Delhi and "generated fictitious sales over numerous financial years". Prem and Bhagat were with the company for over 16 years. Padath alleged that the sales were fictitiously diverted to these warehouses. At the end of December 2011, products worth Rs 147 crore were allegedly invoiced but not delivered. "The said products were thus stolen by accused 1 and 2 (Prem and Bhagat) and the secret warehouses mentioned above were used for storing some of such stolen products," the FIR said, while estimating the value of these goods at Rs 63 crore. The rent for these warehouses was allegedly paid by one Shivam Enterprises, which "supply manpower to the complainant's warehouse". Reebok has also alleged that its two former executives ran an unauthorized franchise referral programme and money was collected on the pretext of opening stores. This was done despite instructions from Adidas headquarters to not expand the store base further, the company said. "Almost no franchise stores were opened under the scheme despite collection of about Rs 114 crore from various investors," the FIR said. It added that Prem and Bhagat forged and fabricated cash receipts and also "maintained parallel books of accounts", known as regional outstanding reports (ROR). "In respect of the account receivable balances, which were at such regional outstanding reports, showed the official balance reported to the group and various adjustments to be made (for) arriving at a 'net recoverable amount'," the FIR said. In case of one customer, the company alleged that the amount outstanding as per its records was Rs 34.36 crore, compared to Rs 13.32 crore in the ROR. On December 31, 2011, the official accounts receivable of all

customers was estimated at Rs 1,007 crore, compared to around Rs 476 crore in the ROR. "In order to hide the fraud, the accused malafidely (sic) passed on extra margin to the customers on the invoice which were treated as credit note reduction as issuing a credit note would have made it obvious that the balance reported in the books (were) not correct," it added. Source-Inditimes

MUMBAI (AP) Germany's Adidas Group said yesterday that Indian police are investigating two former executives from its Reebok India unit for an alleged fraud that could cost the company tens of millions of dollars. Adidas spokesman Jan Runau said the executives under investigation are former managing director Shubhinder Singh Prem and former chief operating officer Vishnu Bhagat. They both left Reebok India in March. A police report says the pair filled four warehouses with stolen merchandise, falsifying bills and siphoning off goods to fake companies and distributors for years, local media reported. Prem has denied the allegations and is suing Reebok for damages, according to local media. The Associated Press could not immediately obtain a copy of the police complaint which details the allegations. Reports of the financial impact of the alleged fraud varied widely. The Press Trust of India reported that the fraud resulted in a loss of 13 billion rupees ($232 million), while the Times of India and the Hindustan Times pegged it at 87 billion rupees ($1.6 billion). Runau said those numbers were "pure speculation." He said the company stood by its April 30 disclosure that irregularities in the India business could cost up to 125 million euros ($158 million), with related restructuring charges of up to 70 million euros ($88 million).

Source-philstar

INDIAN INVESTIGATION: Germany's Adidas Group said Wednesday that Indian police are investigating two former executives from its Reebok India unit for an alleged fraud that could cost the company tens of millions of dollars.

FORMER EXECUTIVES: Adidas spokesman Jan Runau said the executives under investigation are former managing director Shubhinder Singh Prem and former chief operating officer Vishnu Bhagat. They both left Reebok India in March. THE ALLEGATIONS: A police report says the pair filled four warehouses with stolen merchandise, falsifying bills and siphoning off goods to fake companies and distributors, local media reported. Prem has denied the allegations and is suing Reebok, according to local media.

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