Group Members

2122112 Krish Singhvi

2122148 Krish Jain

2122149 Krupal Patel

2122150 Kushagra Bedi

2122151 Manan Lodha

2122153 Meit Baya

2122156 Paras Gidwani

Company Profile
Founded in England in 1895 named
J.W. Foster and Sons.
Manufacturer of Track Shoes
Renamed Reebok in 1958
Started it’s operations in India in
1958
Became of Subsidiary of German
Group “Adidas” in 2005
Product Line
Shoes

Apparels

Sports Equipment

Personal Grooming

Health Products/
About The Scandal
1 Reebok India has a alleged fraud of ₹870 Crore

By its Former MD Mr. Subhinder Singh Prem & Former COO

2
Mr. Vishnu Bhagat

3 Scam came into light on 25th March 2012 During a Forensic Audit

The audit was Conducted by German Arm of E&Y(Ernst & Young)

4
who was appointed by Adidas to conduct the audit

5 Adidas Uncovered a fraud of such magnitude at Reebok India

About The Scandal
In The audit conducted by E&Y, found many transactions between
6
Reebok India and companies owned by Sanjeev Mishra
Since then 12 people, either former employees of reebok or
7
associates like Sanjeev Mishra have been arrested.

According to E&Y around ₹147.25 Crores of goods were “Billed but

8
not delivered”.
The goods were stored in secret warehouses owned by Shivam
9
Enterprises and Oriya Sales Both owned by Mishra.
The goods were even billed and were for sole purpose of inflating
10
sales and no intention of delivering them.
About The Scandal
The audit report also showed that Reebok India showed Higher
11
revenue by effecting retrospective increase in the price of goods sold.

12 These retrospective price increase netted the Co. around ₹86 Crore.

13
The Firm was also engaging in Circular Trading. Goods sold to
Mishra’s Companies Amounted to ₹35.2 Crore.
The actual value was lower around ₹14.3 Crore but recieved only
14
₹3.08 Crores for it.
These goods were further sold to dealers for ₹3 Crore by the two
15 companies, Which also sold back the rest to Reebok India through Om
Trading(Owned by Mishra) for ₹14.4 Crores & reebok paid ₹4.1 Crore
of the ₹14.4 crore
About The Scandal
In a similar transaction Reebok India sold Defective goods to a Co.
16
called KK Enterprises but moved to a secret warehouse later on.

17 Some part of that stock was sold to some unauthorized buyers.

These unauthorized buyers were off the books and the remaining
18
stock were recorded as sales returns
Adidas Filed a complaint. The Police after investigating the two
19
former Reebok Executives Found Fraudulent practices worth
The Police after investigating the two former Reebok Executives
20
Found Fraudulent practices worth ₹8.7 Billion.
Impact of the Scandal

1 Reebok’s sales Declined by 26%.

Reebok India revenue in 2011-12 was 336 million euro against 427
2
million euro in 2010-11.

Adidas AG, the parent of Reebok had written off amount of 200
3
million euros for Indian Operations.
Adidas decided to close their 1/3rd of warehouses for
4
Reconstruction Purposes
Led to reduction of 58 million euros of net income attributable to
4
shareholders and equity of opening balance reduced by 153 Million euro
Reasons for the Scandal

1 Conflict of Interest.

2 Lack of accountability and responsibility.

3 Mismanagement

4 Fraud with government authorities

Strategies after the Scandal

1 Only one MD would head both Adidas and Reebok

2 Reebok’s franchises and distributor model changed globally

3 After 1 year of silence company opened 100 Stores

4 Out of 100 stores 50 were new and 50 were Renovated old stores
Lack of Governance
1 Insufficient Oversight

2 Weak Internal Controls

3 Lack of Transparency

4 Ethical Void
Lack of Governance
1 Risk of Conflict of Interest

2 Inadequate Legal Compliance

3 Poor Accountability

4 Limited Stakeholder Protection

Actions by Authorities

The Serious Fraud Investigation Office(SFIO) filed a case

1
against KPMG India for irregularities in the Audit
The Institute of Chartered Accountants of India initiated
2
Disciplinary action against the COO Mr. Vishnu Bhagat
Changes in Laws & Regulations

1 Companies Act 2013 was introduced

2 SEBI Listing Obligations and Disclosure Requirements

Regulations, 2015: These regulations require listed companies to
disclose more information about their financial position and
operations. They also require companies to have a sound corporate
governance framework in place.