Reebok India has refused to provide detailed documents on the alleged Rs 870-crore fraud in the company to the Institute of Chartered Accountants of India (ICAI), for now. The company told the accounting regulator internal investigations on the alleged scam were underway and, therefore, it couldn’t provide further details on the case.
On May 23, ICAI had written to Reebok India, seeking certain documents and clarifications on the case. This followed the sports goods maker’s German parent Adidas AG lodging a first information report (FIR) with the Gurgaon police, alleging a fraud in its Indian subsidiary. “They have only provided us with a copy of the FIR. They have told us at this moment, they would not be able to give further details to substantiate their allegations, as there is investigation going on at the company level,” ICAI President Jaydeep N Shah told Business Standard.
Earlier, Minister for Corporate Affairs Veerappa Moily had said Reebok wasn’t cooperating in the investigation on the alleged commercial irregularities against it. He had added the company had not given some important documents sought during his ministry’s initial inquiry. This had prompted the ministry to forward the case to the Serious Fraud Investigation Office (SFIO) on May 29. “Our ministry, along with the Registrar of Companies, made some discreet enquiries. The company was non-cooperative and, therefore, we have referred the case to the SFIO,” he had said.
ICAI had also written to Reebok India’s auditor, N Narasimhan & Co, and the company’s former chief operating officer, Vishnu Bhagat, one of the accused in the alleged fraud. It had sought various details, including whether the company had an internal auditor or a statutory one. ICAI, in a letter to the two on May 29, had asked them to reply within 14 days.
“We have received a reply from N Narasimhan & Co, which said it was the statutory and the tax auditor for the company, and as far as the audit was concerned, there was no negligence, no lapses and everything was perfect,” Shah said. He, however, added ICAI was yet to receive any response from Bhagat, a chartered accountant registered with ICAI.
In the FIR, filed on May 21, Adidas AG had accused two former executives — former managing director Subhinder Singh Prem and Bhagat — of “criminal conspiracy” and “fraudulent” practices over a period of time.
The lawyers of the two accused categorically denied their clients were involved in any fraud.
Recently, Adidas had told SFIO it lost about Rs 170 crore because of “goodwill impairment” after it bought Reebok. In its annual accounts, the company stated the “goodwill” primarily related to the group’s acquisition of Reebok and some other brands.