ICAI, IT probe Reebok India case

Reebok India’s auditor N Narasimhan & Co and its former chief operating officer Vishnu

Bhagat have been served a notice by the Institute of Chartered Accountants of India (ICAI) in the Rs 870 crores fraud case. According to ICAI President Jaydeep N Shah they have written a letter to the two on May 29, and asked them to reply within 14 days, failing which, it may take action against them. “We have sought various details and clarifications from N Narasimhan & Co and Vishnu Bhagat. For instance, we have asked both of them to present their version or views on the allegations made in the Reebok fraud case. We have also sought clarification from the auditor as to whether it is an internal or a statutory auditor of the company.”

Shah says, once ICAI receives replies from all sources, it will initiate a detailed investigation into the matter. “Based on the information and replies, we will move ahead with our probe. We will try to correlate and find out if there is any professional negligence of any chartered accountant involved in the matter.” ICAI had earlier also written to Reebok India on May 23, seeking details of the fraud and some clarifications but are yet to be received from the company. One of the points ICAI has sought clarifications on is whether the company’s auditor is an internal or a statutory auditor. If found guilty of wrongdoing and financial misdemeanors, the auditor may be fined by ICAI and have his license revoked.

The controversy erupted after Reebok India’s German parent Adidas AG lodged a complaint with the Gurgaon police, alleging a fraud involving Rs 870 crores in its Indian subsidiary. In the FIR, filed on May 21, Adidas AG accused the two former executives — Subhinder Singh Prem, former managing director and Vishnu Bhagat — of criminal conspiracy and fraudulent practices over a period of time.

Additionally the Ministry of Corporate Affairs and the Serious Fraud Investigation Office say Reebok India has not been cooperating in the probe and has yet to produce the relevant documents and files needed for investigation. Interestingly, in another twist, the two former executives of Reebok India, at the centre of tge alleged fraud, have accused German sports goods maker Adidas of attempting to hammer down the valuation of the Indian unit, as part of its strategy to reduce its payout to the minority shareholder in the company.