a case study / report on Reebok india scandal/scam 2012

1. REEBOK (IND) SCAM 2012
BY…RAGHAV JHA
RAGHAVJHA45@GMAIL.COM(8010969972)

2. COMPANY PROFILE
 Founded in England in 1895 named J.W. Foster
and Sons .
 Manufacturer of track shoes
 Renamed Reebok in 1958
 Started it operations in India in 1996.
 Become a subsidiary of German group ‘Adidas’ in
2005.
RAGHAVJHA45@GMAIL.COM(8010969972
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3. PRODUCT LINE…
 The product line was divided in to 5 sections..
 SHOES
 APPARELS
 SPORTS EQUIPMENT
 PERSONAL GROOMING
 HEALTH PRODUCT / EXERCISING
RAGHAVJHA45@GMAIL.COM(8010969972
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4. ABOUT THE FRAUD….
 Reebok India has alleged a fraud of Rs. 870 crore
 By its former Managing Director Mr. Subhinder
Singh Prem and former Chief operating officer
(COO) Mr. Vishnu Bhagat
 Scam came to known in 25st March 2012 by a
Forensic Audit .
RAGHAVJHA45@GMAIL.COM(8010969972
)

5. ABOUT THE FRAUD
 Irregularities made by them were :---
 Over- Invoicing to of Rs.147Crores to show higher
sales for meeting their annual targets .
 Running a false franchisee
 Maintaining four secret warehouses where
company goods has been diverted and sold
unofficially .
 Siphoned off goods to ghost companies and
distributes across the country claiming they were
defective pieces .
RAGHAVJHA45@GMAIL.COM(8010969972
)

6. ABOUT THE F.I.R
 On 21st may 2012 an F.I.R filed, in GURGAON police ,
After internal investigation by finance director Mr.
Shahin Padath .
 F.I.R. includes …..
 Raising fake invoices of Rs.98crore to show higher sales
and claim promotions, bonus, incentives and to
reconcile stock
 Running a false franchisee , receipts from which
amounts to Rs.114Crores
 Over invoicing to the tune of Rs. 147 Crore .
 Maintaining four secret ware houses
 Raised Finance from Banks by using fake invoices
RAGHAVJHA45@GMAIL.COM(8010969972
)

7. ABOUT THE F.I.R (FRAUDSTERS)
 Main Fraudsters—
 Managing Director Shubinder Singh Prem
 Chief Operating Officer Vishnu Bhagat
 9 other employees including associate Sanjeev
Mishra
RAGHAVJHA45@GMAIL.COM(8010969972
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8. F.I.R. STATUS
 The Company in May 2012 informed to Ministry Of
Corporate about the fraud
 MCA has transferred the case to Serious Fraud
Investigation Office (SFIO), an wing of the ministry.
 On September 19 ,2012 companies M.D , COO and 11
other with whom the fraudulent transaction has been
carried out were arrested.
 Prem & Bhagat left company on 26 march 2012
 The court has granted bail for both of them on July
17,2013
RAGHAVJHA45@GMAIL.COM(8010969972
)

9. IMPACT OF SCAM
 Reebok sales decline by 26 %
 Reebok India revenue in the quarter 2011-12 was
336 million euro as against 427 million euro in the
year 2010-11 .
 Adidas, The parent of Reebok has written off an
amount of 200-million Euros for Indian Operations
in its books of accounts .
 Parent company decided to close their one-third
warehouse for reconstruction purpose
RAGHAVJHA45@GMAIL.COM(8010969972
)

10. REASONS OF SCAM………
 Conflict of interest
 Lack of accountability
 Fraud with government authority
 Mismanagement
RAGHAVJHA45@GMAIL.COM(8010969972
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11. AFTER SCANDAL STRATEGY ……
 Only one M.D will head both Adidas and Reebok
 Reebok franchisees and distributer model changed
globally .
 After one year of silence company open 100 stores
 Out of which 50 new
 Renovation of old stores 50
RAGHAVJHA45@GMAIL.COM(8010969972
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12. CURRENT STATUS …..
 The serious Fraud Investigation Office (SFIO) has
filled a case against KPMG India . For ire regulation
in audit .
 The Institute of Chartered Accountants of India has
also initiated disciplinary action against the COO
(Vishnu Bhagat) who was the member of the
institute.
RAGHAVJHA45@GMAIL.COM(8010969972
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13. RAGHAVJHA45@GMAIL.COM(8010969972
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