REEBOK INDIA FRAUD:-
Reebok
India which deals in Sports Shoes and Sports wears. Reebok India and companies
is owned by Sanjeev
Mishra he provides contract employees to Reebok and among other
circuitous and complex transactions.
Adidas AG acquired
Reebok International Ltd in 2005 for $3.8bn (£2.9bn) in an attempt to close the gap on
bigger rival Nike but has now cut its 2015 sales target for the brand by a
third after two quarters of declining sales.
Adidas
in May 2012 uncovered a fraud of the value of Rs.870
crore at the Indian operations of Reebok. Adidas had given a break-up of the Rs.870 crore as
below:-
è Rs.530 crore on
account of inflated sales, which were not passed on to the company
è
Rs.147 crore in
goods whose invoice were generated but not dispatched
è
Rs.63 crore in
goods returned and pending inspection
è
Rs.0.9 crore on
account of secret warehouse bills
è
Rs.14.82 crore in
interest lost on a franchisee referral programme
è Rs.98 crore on
account of payments to and from customers
An audit report conducted by the German
arm of Ernst and Young (E&Y) on Reebok India
Co. has found fake transactions with unauthorized customers these all done to
falsely increasing the company’s revenue and aimed at meeting targets.
Arrests of
following persons are made:-
à Former managing director Shubhinder Singh Prem
à Former chief
operating officer Vishnu Bhagat
Two were the
main accused arrested and associates like Mishra, have been arrested.
Prem and Bhagat left the company on 26
March.
Praveen Agarwal the lawyer representing
both Prem and Bhagat said the Rs.530
crore is a difference in “reconciliation” and “as such, a non-monetary loss to
the company”.
According to the E&Y detailed audit report
à Rs.147.25 crore of
goods were invoiced but but not delivered and are kept in secret warehouses
owned by Shivam Enterprises and Oriya Sales both owned by Mishra.
è Reebok India hired
these warehouses from Mishra in October 2009, and between then and June 2012,
paid a rent ofRs.1.43
crore.
è
Audit shows that Reebok showed the goods as
having been sold to its dealers and distributors it even had invoices but it
had no intention to deliver them, merely to inflate sales.
è
Audit
also shows that Reebok also inflated sales by storing stock at warehouses which
was returned by dealers and distributors.
è
E&Y’s
report also shows that Reebok India also showed higher sales revenue by showing
increased price of goods already sold to dealers and distributors. This
increased both the sales revenue and the accounts receivable. This will result
into loss to co. around Rs.86
crore, according to the report.
è
Audit
also found that Reebok India had done some circular trading that is selling
goods to be repaired to Mishra’s Shivam Enterprises and Oriya Sales at lower
prices i.e. at Rs.35.2
crore, actually valued at 49.4 crore and even received only Rs.3.08 crore
for these Some of these goods were further sold to dealers for Rs.3 crore by
the two companies, which also sold back the rest to Reebok India through Om
Trading, another Mishra-owned company, for Rs.14.4
crore. And Reebok paid Rs.4.1
crore of the Rs.14.4
crore.
è There were also similar
transactions done by Reebok India audit shows that they also sold defective
goods worth Rs.21.5 crore to
a company called KK Enterprises in December 2011 but they kept them to a secret
warehouse from where some part was sold to some unauthorized buyers.
The
Gurgaon Police filed its charge-sheet in the case on 12 November 2012. Prem, Bhagat
and the other executives had been Jail since September 2012. The police said the accused were
involved in the generation of fake sales and "falsification of books of
accounts of Reebok since 2005"