+

Reebok scandal in
India

Reebok

Reebok International Limited, a subsidiary of the

German company Adidas since 2005, is a producer of
athletic shoes, apparel, and accessories

The Brand Trust Report, India Study, 2011 published by

the Trust Research Advisory ranked Reebok as the 14th
most trusted brand in India

+
How it all started?

Adidas of Germany took over Reebok an US brand

Reebok India under Shubinder Singh pioneered

'guaranteed dealer margins' to push sales

This practice was not favored by Adidas in view of its

German conservative roots

There was a stand off between new management and

Shubinder right from the beginning

This led to an all out war

+
What happened?

In 2010 Adidas smelt a rat and brought in KPMG to probe

into the functions of Reebok India

A report was submitted in June 2011

Probe found that Singhs expenses were more than his

income

Also that Bhagat had showed irrelevant franchises that did

not exist

+
What happened?

Scam came to light in 2012; Shubhinder Singh Prem dismissed as

Reebok India's MD (March 25)

Director Shubinder Singh Prem and COO Vishnu Bhagat of Reebok

India, booked for a scam on May 21, 12 after Internal
investigations by Companys director finance Shahin Padath.

FIR filed in Guragaon Police station

Shubhinder Singh files a defamation case against the company

claiming Rs15 cr as damages

Charges by Adidas:
- Fudging company a/cs
- Operating secret warehouses causing loss to the extent of Rs
870cr

+
Reasons for Indemnification
Irregularities include:

over-invoicing to the tune of Rs 147 crore

Running a false franchisee referral programme, receipts

from which were about Rs 114 crore

Maintaining four secret warehouses where company

goods were diverted, all of which have been sealed and
goods confiscated

Raising fake invoices of about Rs 98 crore to show

higher sales and to show higher sales and claim
promotions, bonus and incentives

Mismanagement led to Reebok

scam: Probe teams

Agencies probing the corporate fraud in the operations of

Reebok India have detected a systemic mismanagement
in the business planning and running of the company,
allegedly done by some of its officials and employees

The three agencies

1.

the income tax (I-T) department under the finance

ministry,

2.

the Serious Fraud Investigation Office (SFIO) under the

Corporate Affairs Ministry and the

3.

Economic Offences Wing of Gurgaon police

The governance and operations in the company were

mismanaged. The bills were inflated and not recorded
correctly

The I-T department, which has indicated an alleged

Rs.140-crore tax evasion in the case, the sources said,
would now work to ensure that the company later does
not claim any bad debt

There were no serious borrowings or lendings of

Reebok India. The probe agencies investigation will
make sure that the firm does not qualify to claim bad
debt from anywhere in the later course, they said.

+
Current Status
Adidas

Group has launched a new programme

for Reebok India's new start to ensure
sustainable profitability for the company.

The

restructuring will involve Franchisee

Transformation Project on revised business
terms.

Adidas

Group India CEOClaus Heckerott

clarified that he will not kill the Reebok brand.

Thank You!