Reebok India stands by its Rs 870-cr fraud allegations
Even as a Gurgaon police investigation into the alleged fraud in Reebok India point to a loss to the company of Rs 11.3 crore, the sportswear maker reiterated its earlier claim that wrongdoing by two former top executives caused the firm a loss of Rs 870 crore.
The probe, by a special investigation team (SIT) of the police, says that former managing director Subhinder Singh Prem and former Chief Operating Officer (COO) Vishnu Bhagat had only caused a loss to the company worth Rs 11.3 crore, while the money made by the duo for themselves was much less.
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“As stated earlier, the financial irregularities could result in a restatement of pre-tax income for the adidas Group of up to euro 125 million (Rs 890 crore today) in 2011 and prior years. Thus, there is no change in the Rs 870-crore figure, reported in the FIR (first information report)," Reebok India said in reply to a questionnaire by Business Standard. “The loss on account of the aforesaid accounting fraud is yet to be fully ascertained by the company," it added.
The police said the chargesheet they filed was only based on the criminal charge that come under its purview. There can be additional charges related to accounting and corporate fraud under the Companies Act. The Gurgaon police and the Serious Fraud Investigation Office (SFIO) are now looking at the possibility of filing a supplementary chargesheet against the two former top executives. Police investigators believe Prem and Bhagat had fudged the books of accounts because they wanted to earn an incentive of Rs 100 crore by showing exaggerated sales figures. The incentive figure was to be distributed among all top executives.
Reebok India refused to comment to the specific query because of the ongoing investigations in the case, but elaborated that the company would continue to help in the police probe.
The SFIO is waiting for the company to file its audited accounts for 2011-12 before finalising the investigation report of the case. Reebok India, which plans to file audited accounts for a period of 15 months ended March 2012, has sought a time extension from the registrar of companies to submit its audited accounts by end of this month.
The Gurgaon police probe also found that Prem and Bhagat had continued with the fraud for a period of three years, because they wanted to improve their performance in hope of getting better placements within the company.
“Prem and Bhagat benefited from these wrong doings because they became managing director and COO of the company, respectively. They wanted to get a large share of the Rs.100-crore incentive that was to be distributed among the top executives of the company," said Maheshwar Dayal, deputy commissioner of the special investigation team (SIT), formed by the Gurgaon police to look into the case.