Adidas Accuses Former Reebok India Managers of FraudPosted: 5/29/2012
Reebok India, owned by Adidas, lodged a police complaint against two former top executives accusing them of fraud that had led the company to lose Rs 870 crore ($157 million). Adidas alleged that Subhinder Singh Prem, Reebok India's former managing director, and Vishnu Bhagat, formerly Reebok India's COO, stole and diverted the company's products and kept them in four secret warehouses though Adidas has nine warehouses of its own.
Adidas said in March that the two men had left the company.
According to local media reports, Adidas has accused Prem and Bhagat of stealing products, diverting them from the Adidas supply chain and storing them in warehouses in Delhi. The pair are also suspected of trying to artificially boost sales in order to benefit from a company incentive scheme. The company also claims that the pair collected money “fraudulently” from potential franchise partners on the pretext of opening new branches.
According to the London Times, Adidas has sought the help of Control Risks, an investigations specialist, to build a case against the two men who are alleged to have used a network of secret warehouses to siphon off Adidas footwear and clothing that had been fraudulently booked as sales.
In reporting first-quarter results, Adidas said “commercial irregularities” had been discovered at its Reebok India business with a potential impact on earlier financial statements by up to €125 million pre-tax. “commercial irregularities” had been discovered at its Reebok India business with a potential impact on earlier financial statements by up to €125 million pre-tax. Adidas also announced plans to shut down around 300 of its 900 Reebok stores in India as part of a restructuring plan.
Herbert Hainer, Adidas Group CEO, on a conference call with analysts said the company cannot comment further given the ongoing investigation while noting that the incident has provided an opportunity to restructure an underperforming region for the Reebok brand. Under a new leadership team, which was announced at the end of March, “we will now accelerate and more aggressively restructure our business activities in India, including significant changes to our commercial business practices.”
Adidas launched an internal company investigation in January after concerns regarding financial and stock irregularities at its Indian operation. Adidas bought US rival Reebok in August 2005 for $3.8 billion but their Indian operations were merged only in 2011.
(Adidas accuse les anciens gestionnaires Reebok en Inde de fraude / 阿迪达斯指责前锐步印度经理诈骗 / Adidas klagt ehemalige Reebok-Manager von Indien Betrug / アディダスは、詐欺の元リーボックインドマネージャを非難 / Adidas acusa a ex gerentes de Reebok India de fraude / Adidas обвиняет бывшего Reebok Индии менеджеров в мошенничестве / Adidas accusa ex manager di Reebok India di frode / एडिडास धोखाधड़ी का रिबॉक भारत के पूर्व प्रबंधक आरोप )