SFIO report finds Reebok guilty of fudging A/Cs: Sources

The Serious Fraud Investigation Office (SFIO) that was tasked to probe Reebok India has confirmed falsification of books of accounts in the company to the tune of over Rs 1,400 crore.

Importantly SFIO has also pulled up Reebok India for lax corporate governance and weak internal processes that allowed Reebok’s former executives Subhinder Singh and Vishnu Bhagat to manage the affairs of the company with absolute discretion, reports CNBC-TV18's Ronojoy Banerjee.

Also read: Adidas sticks with Reebok despite 265m-euro writedown

It was a complex yet a meticulously planned operation since 2007. Top sources have told CNBC-TV18 that SFIO has found evidence of the former disgraced Reebok executives inflating sales to the tune of Rs 655 crore during the period 2007 to 2011.

This was done in an effort to get sales-linked incentive-linked bonuses. The accused increased sales and franchisees primarily through two routes – one, through, fake invoicing of goods or 'billed but not dispatched' practice between 2008 to 2011, the company falisifed accounts to the tune of Rs 321.57. Inflated sales were covered up through parallel books of accounts called 'regional outstanding reports'.

SFIO sources say through such a method account receivables were fraudulently overstated to the tune of Rs 530 crore.  The company also accepted deposits from the public under the garb of a 'franchise referral programme'.

During 2010 and 2011, a total of Rs 88.11 crore was raised from 56 parties but only one of them went on to actually open a franchisee. 

The report has also highlighted the role of the then head of Adidas-Reebok in India Clause Heckerott and other senior executive board members of parent firm Adidas AG, including CEO Herbert Hainer who was also aware of the strategy of pushing sales and stuffing the franchisee channels.