New Delhi: The case of alleged financial irregularities at the Indian arm of Adidas AG’s Reebok unit was referred to the Serious Fraud Investigation Office (SFIO) by the government on Monday.
The move follows scrutiny of Reebok India’s accounts by the Registrar of Companies (RoC). SFIO and RoC come under the corporate affairs ministry.
“Prima facie, we have found something wrong in their (Reebok) books. The matter has now been referred to SFIO for further investigation,” Veerappa Moily, corporate affairs minister, told reporters in New Delhi. Moily said that the RoC report was submitted to the ministry on Monday.
Adidas has accused two of its former top executives in India of a Rs 870 crore fraud. The company had filed a first information report (FIR) with the Gurgaon police on 21 May in which it had accused former managing director Subhinder Singh Prem and ex-chief operating officer Vishnu Bhagat of indulging in “criminal conspiracy” and “fraudulent” practices over a period of time.
A senior ministry official with direct knowledge of the matter said the case had been handed over to SFIO on Monday as the ministry “found that the people involved in the case were not cooperating”.
Although the matter had first been registered with RoC, it didn’t make much progress with the investigation, the official said. The official, however, declined to comment on whether SFIO had been set a time frame for the probe and whether SFIO and the Gurgaon police would jointly investigate the case at any stage.
Phone calls and text messages to the mobile phones of Prem and Bhagat remained unanswered.
“We are cooperating with the authorities in their investigation. Please understand that we cannot provide any further details since the matter now rests with the Indian law enforcement authorities,” said an Adidas India spokesperson over the phone.
Meanwhile, on Saturday, a local Gurgaon court rejected anticipatory bail pleas filed by Prem and Bhagat.
Maheshwar Dayal, deputy commissioner of police of Gurgaon, said a special investigation team had issued look-out circulars as a precautionary measure on Prem and Bhagat. These circulars are usually posted at airports and other ports of exit to keep a check on those travelling across borders.
The corporate affairs ministry’s investigation followed a probe by the income-tax department into the company’s finances. The tax department has started issuing notices to the company’s executives, PTI reported on 24 May. The tax department conducted a survey at the company’s Gurgaon office to collect additional documents, PTI said.
A spokeswoman for the Central Board of Direct Taxes declined to comment.
Tax officials are also looking at the firm’s corporate structuring and financing, PTI said. Notices for the production of documents, personal transactions and tax returns for the last four years have been sought, the agency reported.
The economic cell of the Gurgaon police conducted an investigation and found that Prem and Bhagat had allegedly rented four warehouses without informing their managers and used them to store diverted goods that were being supplied to genuine dealers, according to the FIR.
Prem, who worked with Reebok India for 16 years, resigned on 26 March.
Earlier this month, he sued his former employers for Rs 15 crore over charges of defamation and abrupt termination of services, according to The Economic Times newspaper, while denying any wrongdoing.
Adidas said in March that Bhagat had left the company.
Adidas bought rival Reebok International Ltd in August 2005 for $3.8 billion (around Rs 21,128 crore today), but the merger of their Indian operations was only completed in 2011.
Earlier this month, Adidas, the world’s second largest sporting goods firm, said it will cut the number of Reebok stores in India by one-third as it was tackling the financial irregularities.
PTI contributed to this story.
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