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Moily says Reebok not cooperating in probe, case referred to SFIO

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Stating that Company was not cooperating in the investigation of a commercial irregularities case against it, the Ministry of Corporate Affairs on Tuesday decided to refer the matter to the Serious Fraud Investigation Office (SFIO). The case allegedly involves a fraud of Rs 870 crore by two former employees.

The employees at the centre of the storm are Subhinder Singh Prem, former managing director of India, and Vishnu Bhagat, former chief operating officer. The SFIO, the investigation wing of the ministry, had come into the limelight a few years ago when it handled the case, which involved a fraud by promoters led by Ramalinga Raju.

Speaking to Business Standard, Corporate Affairs Minister said, “Our ministry made some discreet enquiries along with the Registrar of Companies. The company was non-cooperative and, therefore, we have referred the case to the SFIO.”

Moily added the ministry could not take a soft line on such a case. “I had ordered an inquiry 10 days back. We had asked the company to submit some more important documents but they have not cooperated with us,” he said.

The minister refused to comment on the exact amount involved in the fraud, whether proper audits were conducted and if the ministry had found more lapses in the company’s accounts during the inquiry.

Responding to a question on Moily’s comment that the company had not cooperated, a spokesperson of Adidas India (which includes Reebok India Company) said all possible assistance was being given.

“We are cooperating with the authorities in their investigation. Please understand that we cannot provide any further detail since the matter now rests with the Indian law enforcement authorities,” the spokesperson said.

Prem, when asked about the investigation, said, “We are happy that government agencies are looking into this and it will prevent Adidas from booking losses.”

The Registrar of Companies had carried out an inquiry after a complaint by an investor and the report was submitted to the ministry yesterday.

Last week, a trial court in Gurgaon had denied anticipatory bail to Prem and Bhagat. The police have argued that after going through the documents collected during the investigation, they should get an opportunity to question the accused.

The lawyers of the two accused have categorically denied their clients are involved in any fraud.

The latest development comes a few days after a first information report (FIR) was filed by Reebok India Company with the Gurgaon police against the former employees.

In the FIR, the company had said during an internal investigation it found the duo was operating four secret warehouses in Delhi, where all the goods diverted from the company used to be kept.

The internal investigation was conducted by Padath Claus Heckerott, who replaced Prem as the group MD in India, and private firm Control Risks, which visited the said warehouses on March 30 and 31.

It was alleged in the FIR Prem and Bhagat generated fictitious sales over numerous financial years, which were diverted to these warehouses. That resulted in a loss of Rs 870 crore to the company, it was alleged.

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