Corporate Jun 5, 2012
In another twist to the Rs 870-crore Reebok fraud, two former company executives accused of fudging company accounts and operating secret warehouses, have blamed Adidas for hammering down the valuation of the Indian unit, as part of a strategy to reduce the payout to the minority shareholder in the company (Reebok).
According to an Economic Times report, Subhinder Singh Prem and former chief operating officer Vishnu Bhagat have alleged that the German sports goods maker asked them to manipulate company accounts "to ensure that the market value of Reebok India fell so that a significantly lower amount becomes payable to the exiting Indian joint venture partner." In other words, Adidas wanted make a minimum payout to buy out Focus Energy's 6.85 percent stake in Reebok India.
Adidas filed a criminal complaint on 21 May after saying last month it had found flaws at the Indian arm of its Reebok unit. Police are investigating two former Reebok India executives after the company alleged fraudulent practices.
Adidas had sacked the two officials in March 2012, and in May, the duo was accused of financial embezzlement. However, the two officials told the Delhi high Court last month that their refusal to 'carry out unethical and illegitimate requests' by Adidas is what led to bitterness between them and the management, said the ET report.
It was in 2010 - a year before Adidas merged its India operations with Reebok - that the parent firm first brought in KPMG India's forensic team to look into possible manipulation in the accounts of Reebok by two of its senior-most employees. However, KPMG gave Prem and Bhagat a near clean chit concluding there was "no evidence to prove allegations of possible fraudulent behavior" by either of them.
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