Reebok India alleges Rs8,700-cr fraud by sacked top execs
23 May 2012
In what could be the second biggest fraud in Indian corporate history, Reebok India has booked cases with the Gurgaon police against its sacked managing director Subhinder Singh Prem and former chief operating officer Vishnu Bhagat, alleging that they had together perpetrated a fraud worth Rs8,700 crore.
Reebok said in the first information report that Prem and Bhagat had 'stolen' products by setting up 'secret warehouses', fudged accounts and indulged in fictitious sales at a massive cost to the company. If true, the fraud would be second only to the accounts-fudging at Satyam Computer Services by its founder, B Ramalinga Raju.
When the alleged scam at Reebok came to light in March 2012, Singh, who was made managing director of Adidas India in 2011 as part of an integration of the businesses of the Adidas and Reebok brands of sportswear, was dismissed from the company. Bhagat's services were terminated too. They had both been with Adidas for over 16 years.
In regulatory filings on 1 May, Adidas, which owns the Reebok brand, had said that commercial irregularities in India had forced it to take a Rs870 crore hit in addition to restructuring spend of Rs470 crore planned in 2012. Reebok India's turnover is estimated at around Rs600 crore.
The economic cell of Gurgaon police had, earlier, conducted a probe and found that Singh and Bhagat had rented four warehouses without informing their seniors and used them to store goods, which they claimed had been supplied to dealers.
They also allegedly siphoned off goods to ghost companies and distributors across the country, claiming they were defective pieces.
The Times of India reported that 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".