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Reebok India alleges fraud by top executives
Sportswear manufacturer accuses former MD and CEO of committing fraud that led company to lose around $157m.
Last Modified: 24 May 2012 09:06
Company announced this month plans to close one-third of Reebok India stores due to "financial irregularities" [AFP]

Sportswear manufacturer Reebok India has lodged a police complaint against two former top executives accusing them of fraud that had led the company to lose millions of dollars.

The company, owned by Germany's Adidas, is accusing former India Managing Director Subhinder Singh Prem and former Chief Operating Officer Vishnu Bhagat of financial wrongdoing resulting in the loss of $157m (8.7bn rupees), police in the northern city of Gurgaon said on Wednesday.

The alleged fraud would be the most high-profile corporate scandal in India since 2009 when Satyam Computer's former chairman and founder Ramalinga Raju revealed that the company had overstated profits and falsified assets for years.

Investigation under way

"Our criminal complaint has been registered for investigation by the Indian law enforcement authorities," Adidas said in a statement.

"We shall continue to co-operate with the authorities in their investigation of the matter."

Prem did not respond to calls by Reuters, while Bhagat could not be immediately reached. Adidas said in March that the two men had left the company.  

"We have started our investigation and will now be checking the records of the company and carrying out an audit," an
officer with the economic unit of the Gurgaon police said.

Earlier this month, Adidas, the world's second-largest sporting goods company, said it will cut the number of Reebok stores in India by one-third as it was tackling "financial irregularities" at Reebok's Indian operations.

Prem filed a suit against Adidas after the German company's announcement and claimed damages of 150 million rupees, according to the Economic Times. The newspaper said Prem denied any involvement in financial irregularities.

According to local media reports, the company alleged that the two former officials stole products, set up secret warehouses, fudged accounts and engaged in fictitious sales for several years.

The reports also said Reebok alleged that the two officials ran an unauthorised franchise referral programme and money was collected on the pretext of opening new stores against instructions from Adidas.

Adidas bought US rival Reebok in August 2005 for $3.8bn but their Indian operations were merged only in 2011.

Source:
Agencies
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