New Delhi: The Serious Fraud Investigation Office (SFIO) will begin a probe into alleged financial irregularities at the Indian arm of Adidas AG’s Reebok unit in about a week, a top corporate affairs ministry official said on condition of anonymity.
“This is a complex case. The SFIO has not begun scrutinizing the papers yet. Formal investigations will take at least another week to begin,” the ministry official said.
The Gurgaon police, which is investigating the criminal aspects of the case, will begin questioning former and present company officials in the coming week, said Maheshwar Dayal, deputy commissioner of police, Gurgaon (east).
The government referred the case to SFIO, which comes under the corporate affairs ministry, on 28 May. Following this, SFIO and ministry officials had said the agency would complete the investigations in four to five months.
The move followed a scrutiny of Reebok India’s accounts by the Registrar of Companies (RoC). In its report, RoC stated that Reebok India was not fully cooperating and not furnishing the required documents, Mint reported on 31 May, citing another ministry official.
Adidas bought Reebok International Ltd in August 2005 for $3.8 billion (around Rs21,052 crore today) but the merger of their Indian operations was completed only in 2011.
The case unfolded as Adidas accused two former top Reebok executives in India of a Rs870 crore fraud. The company filed a first information report with the Gurgaon police on 21 May accusing its former India managing director Subhinder Singh Prem and ex-chief operating officer Vishnu Bhagat of indulging in “criminal conspiracy” and “fraudulent” practices.
Prem and Bhagat have denied any accusations of wrongdoing. Prem has also filed a suit against Adidas over defamation and abrupt termination of services.
Dayal said that as part of a raid last week Gurgaon police had “seized computers as well as property documents from the houses of both Prem and Bhagat”. Dayal, however, said the police could not yet ascertain whether the property documents were directly related to the alleged fraud or not.
The police also raided four warehouses in the national capital region and had “seized inventory including apparel and sunglasses, among other things, worth lakhs”, he said.
On 6 June, The Economic Times newspaper reported that the international tax division of the Central Board of Direct Taxes had sent a notification to Adidas India Marketing Pvt. Ltd asking for income tax returns for the financial year 2010-11 and a letter seeking information for previous years.