Reebok under tax lens, Adidas seizes goods from warehouses

The I-T department has launched a probe into the finances of Reebok India, which has filed a fraud case against its two former employees, even as the Gurgaon Police said the company's claim of Rs 870 crore deceit is "far from reality" and the amount "would be less".

The Income Tax Department, which had earlier this month conducted a survey at the Gurgaon office of the sportswear manufacturer, has begun issuing notices to its executives, sources said. Notices to produce documents, personal transactions and I-T returns for the last four years have been sought from the India-based executives of the firm for the income tax probe to check any possible financial wrongdoing in the company and subsequent tax evasion, sources said.

The I-T investigations directorate has also alerted its intelligence wing in this regard to supply it with necessary inputs, sources added.

 Reebok under tax lens, Adidas seizes goods from warehouses


Reebok India had filed a FIR against the two top executives who were forced out of the company last month in a blaze of controversy. German sportswear and equipment maker Adidas, which owns the Reebok brand, filed a case of fraud, cheating and theft.

Earlier in the day, Gurgaon Police, which is probing the alleged Rs 870-crore fraud in Reebok India by former MD Subhinder Singh Prem and COO Vishnu Bhagat, said the company's claim is "far from reality" and the amount "would be less". "The amount involved in the scandal would be less," Maheshwar Dayal, DCP (East), Gurgaon told PTI.

When asked about the likely magnitude of the scandal, he did not elaborate while saying the company's claim that it will have to take a total hit of approximately Rs 870 crore and will have to incur a restructuring cost of Rs 487 crore is "far from reality". When contacted, the company as well as Prem and Bhagat declined to comment.

Giving an update on the investigation so far, Dayal said three, out of "four secret warehouses", which Prem and Bhagat had allegedly operated to "keep diverted and stolen stocks" have been found to be empty. The possession of fourth "secret warehouse" where some goods were found was taken by the company, he added.

All the four warehouses are in Delhi - two in Bijwasan and Vasant Vihar each. Meanwhile, an Economic Times report said Adidas India has confiscated goods from three of the four 'secret' warehouses where it alleged that its former top executives had stashed products worth Rs 63 crore.

Reebok India, in its FIR filed on May 21, had stated that it has nine official warehouses but alleged that Prem and Bhagat were "operating four secret warehouses to keep the clandestinely diverted and stolen stocks" which were not reported in the books of the company.

Reebok India had alleged that Prem and Bhagat had indulged in "criminal conspiracy" and "fraudulent" practices over a period of time that resulted in a loss to Adidas group.

Reebok and Adidas operated independently in India until 2011. Prem, who had headed Reebok till then, was appointed managing director of the combined entity that year, while Bhagat who used to handle finance, remained with Reebok but as the COO of the firm. Adidas claims that it found out in internal investigations that Prem and Bhagat stole merchandise amounting to Rs 62.99 crore as on December 31, 2011.

"Reebok India's franchise owners are worried over payment delays after the new management took control recently. Around 35 franchisee owners have sent a joint letter to the new CEO and other top executives at Adidas, requesting pending payments to be cleared, especially of stores that were shut during its restructuring," said the ET report.

While the FIR had mentioned the loss at "approximately Rs 8,700 crore", Dayal had clarified yesterday that the company in its original complaint had stated that the hit due to alleged fraudulent practice of its two former top executives was "Rs 870 crore" and the amount mentioned in the FIR was a typographical error.

Reebok India further said it will also incur a restructuring cost of Rs 487 crore to remedy the consequences of the "criminal and fraudulent" acts of its formers top executives.

Dayal further reiterated that now "the onus for proving these (former) two senior officials guilty lies with the company" and that was why the police had sought relevant documents and proof from Shahin Padath, Director, Finance, Reebok India.

So far the police have not received any other documents except the copy of the complaint now from the company, he added.

With inputs from PTI

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Updated Date: Dec 20, 2014 08:39:09 IST