Reebok India’s sacked managing director Subhinder Singh Prem, former COO Vishnu Bhagat and three others were today sent to police remand for seven days by the Gurgaon judicial magistrate. The five former employees which also includes Sanjay Mishra, Prashant Bhatnagar and Surakshit Bhatt were arrested yesterday for their alleged involvement in a Rs 870-crore fraud in the company.
Arguing before the judicial magistrate the Gurgaon police asked for 10 days as it had to go to Goa and Ahmedabad. The magistrate however granted custody for only seven days.
The Gurgaon police stared investigating the case after a complaint by Reebok India finance director Shahim Padath, lodged a formal complaint against the duo on the complaint of Shahim, an FIR was lodged against them though Prem and Bhagat have denied the charges.
The special investigation team (SIT) in Gurgaon has alleged that it has found four illegal warehouses which were by Prem, Bhagat and Bhatnagar in the name of Sanjiv Mishra who is a service provider and owner of Shivam Enterprises, Oriya Sales and Om Trading. The exisitence of these warehouses were not disclosed to auditors, tax authorities and the Adidas management in Germany
SIT has also alleged that billed goods worth Rs 62 crore were kept in these warehouses but not dispatched. It also says that in financial year of 2011 fake institutional sales of Rs 21 crore were made by Prem and company.
SIT has contended that the group was involved in fake sales and falsification of accounts since 2005. It also showed fake receipts from franchisees and collected Rs 108 crore through FRP scheme and In & Out transactions. They also allege that they carried out circular transactions of Rs 98 crore, where funds were routed through 8 customers and vendors. They also made interest payment of Rs 14 crore against the FRP investment by creating forged ledger account.
The SIT said that Prem and his associates have misused the invoice discounting facility with Standard Chartered Bank, Deutsche Bank and Bank of America to discount the same invoices from two different banks simultaneously. This way they obtained short term funding from banks amounting to Rs 82 crore.
The accused also used sales return invoices that were reversed in the system for discounting from banks and obtained credit of Rs 42 crore. The money obtained from such forgery was deposited in Reebook’s bank account on which investigation is going on.
The police statement also mentioned that Prem had minimium nine back accounts, and Bhagat had eight in their own and family members’ names. Prem holds 20 residential and commercial properties in Gurgaon and other parts of India and Bhagat owns 12 properties. Prem had rented out some of his own properties to vendors and customers of Reebok, according to the police statement.
A Reebok India spokesperson when contacted however said: “The investigation of the criminal complaint filed by Reebok India Company has progressed to the next stage by the Indian law Delhi enforcement authorities. Reebok India Company has and will continue to cooperate with the investigation authorities”
While Prem and his associates were expected to appear at the court around noon, the five were eventually produced past 3.30 pm.
The alleged scam came to light in March 2012, Prem, who had been made the managing director of Adidas India last year as part of an integration of the businesses of both Adidas and Reebok brands, was dismissed from the company. Bhagat’s services were terminated, too.
The case is also being investigated by the Serious Fraud Investigation Office (SFIO), which investigated the alleged fraud in the company. The SFIO is expected to come out with its interim report in a few weeks.