ICAI, SFIO to investigate auditor’s involvement in Reebok case

Apparel

ICAI, SFIO to investigate auditor’s involvement in Reebok case

by
1 Jun 2012

Ten days after an FIR filed by Reebok against its former Indian

employees for committing a Rs 870-crore fraud, the Gurgaon police is still awaiting from the sports shoemaker documents to back its allegations.

A source close to the sacked two top executives said that the charges of financial bungling leveled by the company were related to the period prior to December 2011. And, no financial irregularities were mentioned against the duo by the annual accounts of Adidas AG, the German sports goods maker that owns Reebok globally in the probe that was carried out last year.

He also said that KPMG, its global auditor, that prepares a report on the financials of both subsidiaries as per international financial reporting standards (IFRS) had not flagged any financial misappropriations in its report on Reebok India. However, KPMG India`s partner Rajesh Arora declined to comment on this issue. It is also speculated by the ICAI (Institute of Chartered Accountants of India) that there are critical lapses in the way the company's auditors had functioned; since, without the knowledge of auditors, both internal and statutory, such huge misappropriation of funds is impossible.

Meanwhile, Corporate Affairs Minister Veerappa Moily addressing the case said that he would not hesitate to go after the global auditors of the company if concrete evidence was found against them. "In the process of investigation, if we find the auditors have also joined in supporting the fraud, then we will investigate. But it is too early to draw any inference," he added said.

Earlier, the Ministry of Corporate Affairs had transferred the case allegedly involving a fraud of Rs 870 crores against two former employees of Adidas India to Serious Fraud Investigation Office (SFIO), pointing out non-cooperation from the side of Reebok India, a subsidiary of Adidas during investigation.

The case was referred to SFIO looking at the way it handled the scam of Satyam Computer.The two employees under scanner in Adidas case are Subhinder Singh Prem, former MD of Adidas India, and Vishnu Bhagat, former COO. Prem, said about the investigation, said, “We are happy that government agencies are looking into this and it will prevent Adidas from booking losses.”

Corporate Affairs Minister Veerappa Moily, had said, “The ministry could not take a soft line on such a case. I had ordered an inquiry 10 days back. We had asked the company to submit some more important documents but they have not cooperated with us.” Conversely, spokesperson of Adidas denying all the non-cooperative charges bestowed on them by Moily, said that the company gave all assistance in the investigation.

The alleged scam came to limelight after an internal investigation was conducted by Padath Claus Heckerott, who replaced Prem as the group MD in India, and private firm Control Risks, which visited the said warehouses. Recently, the two accused were denied anticipatory bail by a trial court in Gurgaon as the police wanted to probe them. The lawyers of the two accused have categorically denied their clients to be involved in any fraud.