Prosecution proceedings start in Reebok case

Reebok India had alleged fraud by its former MD Subhinder Singh Prem and former chief financial officer Vishnu Bhagat

The government has started prosecution proceedings in the case of alleged financial fraud at sportswear maker Reebok India.

This follows the Serious Fraud Investigation Office (SFIO) giving its report to the corporate affairs ministry on this case.    

In its First Information Report filed last year, Reebok had alleged financial fraud to the tune of Rs 870 crore at the company by certain persons, including senior executives of its India arm. “Whatever the SFIO findings were and the people involved, the prosecution has been sanctioned... The prosecution has started. We took legal opinion and did what was the best thing to do” Corporate Affairs Minister Sachin Pilot said. However, Pilot did not provide details.      

Reebok India had alleged fraud by its former managing director Subhinder Singh Prem and former chief financial officer Vishnu Bhagat. Both have denied the charges.  Adidas, the German parent firm of Reebok, has communicated to the ministry that the global management team of the company acted like a whistleblower in bringing the fraud to light and they should be kept out of any prosecution.  Asked about the case, Pilot also said that “anybody who is a whistleblower or someone who has flagged the issue and reported something, then to prosecute them perhaps is not the best thing." He added, “The view we got from many sources was that if you are a whistleblower and you are a complainant, you can't then also be prosecuted for the same case.”  

A Reebok India spokesperson had in August this year also said it was important to reiterate that the company was the primary victim of the fraudulent activity. “In fact, the company originally discovered the fraud and was the whistleblower to the government authorities. The company has in the past fully supported the authorities in their investigation and will continue to do so,” the spokesperson had said at that time.     

In March, Adidas said its balance sheet for 2011 was negatively impacted by euro 153 million on account of commercial irregularities at its arm Reebok India.