The extent of wrongdoing in the alleged fraud atReebok’s Indian unit may be much lower than what has been claimed by Adidas AG, going by a charge sheet filed by Gurgaon police in the case. According to the document, which was filed by the police at the Gurgaon district court recently, the total loss incurred by Reebok India on account of alleged financial irregularities is to the tune of Rs.11.3 crores.
The sum is just a fraction of the Rs 870 crores mentioned in a May 21 first information report (FIR) filed by Adidas as the extent of its loss on account of former employees siphoning off funds and creating “ghost distributors” and “secret warehouses”. The charge sheet says the loss incurred due to “theft through secret warehouses” amounted to Rs 1.87 crore and that the loss on account of fraud through “franchisee referral program” and “falsification of accounts” was Rs 9.42 crores. The police have not been able to ascertain claims on “cheating through fake sales”, and so-called “in-and-out” (a term used in inventory accounting) transactions. The police also failed to put a figure on the losses due to “overstated accounts receivable”, “maintenance of parallel accounting records” and “fraudulent retrospective price increases”.
Adidas, which acquired Reebok in August 2005, had accused two former executives, former managing director Shubhinder Singh Prem and chief operating officer Vishnu Bhagat, of perpetrating the fraud by siphoning off funds from the firm by creating ghost distributors and generating forged bills over the past five years.