- Reebok's former Managing Director in India, Subhinder Singh Prem, was dismissed in 2012 amid allegations of fraudulent accounting practices at Reebok India totaling Rs. 870 crore ($155 million).
- A forensic audit found evidence that Prem inflated sales figures through unauthorized warehouses and fake transactions. Reebok India filed a police complaint and the Serious Fraud Investigation Office launched a probe.
- The scandal uncovered irregularities like goods invoiced but not delivered, inflated sales through retrospective price increases, and circular trading schemes. It caused Adidas, which acquired Reebok in 2005, to announce a €125 million write-off.
- Founded in England in 1895, Reebok was renamed in 1958 and expanded to North America in 1979 when Paul Fireman purchased distribution rights.
- Reebok retail outlets sell sports accessories like shoes, apparel, equipment and health products divided into categories.
- In 2012, a Rs. 870 crore fraud was alleged against former Reebok India MD Subhinder Singh Prem and COO Vishnu Bhagat involving fudged accounts, secret warehouses, and siphoning goods to ghost companies. Investigations found systemic mismanagement in business operations and planning.
Reebok India alleged a Rs. 870 crore fraud by its former Managing Director and Chief Operating Officer in 2012. A forensic audit revealed they had over-invoiced sales, maintained secret warehouses, and siphoned goods to ghost companies. An FIR was filed against the two former executives and 11 others for fraudulently raising fake invoices and receipts totaling over Rs. 350 crores. The fraud led to a 26% decline in Reebok sales in India. Parent company Adidas wrote off 200-million Euros and closed one-third of Reebok's warehouses in response to the scam.
REEBOK SCAM AND ITS MERGER WITH ADIDAS. DID THE MERGER WITH WORK. HOW DID REEBOK CAME INTO LIGHT BECAUSE OF THE FRAUD IN INDIA WHICH FEATURED THE TOP AUTHORITIES OF THE COMPANY. HOW DID REEBOK GROW IN INDIA AND THEN JUST DISAPPEARED.
The scam can be categorized as capital market scam
in which it is done by manipulating the facts in order to attain enormous funds.
There are four different aspects of the scam.
Diversion of funds
Intra day trading
Use of ready forward to maintain SLR
Fake bank recipts
HERE IS THE PPT ON PNB SCAM
NIRAV MODI
WE MADE IT BASED ON EARLIER FACED FRAUD BY PNB
FRAUDSTER NAME IS NIRAV MODI
I THINK IT WILL CLEAR ALL YOUR DOUBTS ABOUT SCAM
The Harshad Mehta Scam Exposed. The entire mechanism and who were the key parties involved, the aftermath and the effects of the scam on the stock market and the overall Indian Economy. The ethical issues involved and the action taken to prevent any such scams in the future by the government.
Punjab National Bank scam summary:
1. Nirav Modi allegedly defrauded Punjab National Bank of $2 billion through fraudulent letters of undertaking issued by rogue bank employees without collateral.
2. The scam was detected in January 2018 when another bank employee refused to issue more letters of undertaking without collateral for previous loans.
3. Nirav Modi, his relatives and associates, and bank employees are being investigated for their involvement in the largest banking fraud in Indian history.
Punjab National Bank Fraud (Nirav Modi Scam) ppt presentation slideshareFatema Tandiwala
A case study presentation on Punjab National Bank scam (Nirav Modi)
India's second largest state-owned lender Punjab National Bank disclosed on Feb. 14, 2018 that it was the victim of the country’s largest bank fraud.
PNB revealed that fraudulent transactions by billionaire jeweler Nirav Modi and related entities amounted to $1.77 billion or over Rs 11,400 crore.
The key accused in the case were jeweler and designer Nirav Modi, his maternal uncle Mehul Choksi, and other relatives and some PNB employees.
Nirav Modi and his relatives escaped India in early 2018, days before the news of the scam became public.
PNB scam has been dubbed as the biggest fraud in India's banking history.
- Founded in England in 1895, Reebok was renamed in 1958 and expanded to North America in 1979 when Paul Fireman purchased distribution rights.
- Reebok retail outlets sell sports accessories like shoes, apparel, equipment and health products divided into categories.
- In 2012, a Rs. 870 crore fraud was alleged against former Reebok India MD Subhinder Singh Prem and COO Vishnu Bhagat involving fudged accounts, secret warehouses, and siphoning goods to ghost companies. Investigations found systemic mismanagement in business operations and planning.
Reebok India alleged a Rs. 870 crore fraud by its former Managing Director and Chief Operating Officer in 2012. A forensic audit revealed they had over-invoiced sales, maintained secret warehouses, and siphoned goods to ghost companies. An FIR was filed against the two former executives and 11 others for fraudulently raising fake invoices and receipts totaling over Rs. 350 crores. The fraud led to a 26% decline in Reebok sales in India. Parent company Adidas wrote off 200-million Euros and closed one-third of Reebok's warehouses in response to the scam.
REEBOK SCAM AND ITS MERGER WITH ADIDAS. DID THE MERGER WITH WORK. HOW DID REEBOK CAME INTO LIGHT BECAUSE OF THE FRAUD IN INDIA WHICH FEATURED THE TOP AUTHORITIES OF THE COMPANY. HOW DID REEBOK GROW IN INDIA AND THEN JUST DISAPPEARED.
The scam can be categorized as capital market scam
in which it is done by manipulating the facts in order to attain enormous funds.
There are four different aspects of the scam.
Diversion of funds
Intra day trading
Use of ready forward to maintain SLR
Fake bank recipts
HERE IS THE PPT ON PNB SCAM
NIRAV MODI
WE MADE IT BASED ON EARLIER FACED FRAUD BY PNB
FRAUDSTER NAME IS NIRAV MODI
I THINK IT WILL CLEAR ALL YOUR DOUBTS ABOUT SCAM
The Harshad Mehta Scam Exposed. The entire mechanism and who were the key parties involved, the aftermath and the effects of the scam on the stock market and the overall Indian Economy. The ethical issues involved and the action taken to prevent any such scams in the future by the government.
Punjab National Bank scam summary:
1. Nirav Modi allegedly defrauded Punjab National Bank of $2 billion through fraudulent letters of undertaking issued by rogue bank employees without collateral.
2. The scam was detected in January 2018 when another bank employee refused to issue more letters of undertaking without collateral for previous loans.
3. Nirav Modi, his relatives and associates, and bank employees are being investigated for their involvement in the largest banking fraud in Indian history.
Punjab National Bank Fraud (Nirav Modi Scam) ppt presentation slideshareFatema Tandiwala
A case study presentation on Punjab National Bank scam (Nirav Modi)
India's second largest state-owned lender Punjab National Bank disclosed on Feb. 14, 2018 that it was the victim of the country’s largest bank fraud.
PNB revealed that fraudulent transactions by billionaire jeweler Nirav Modi and related entities amounted to $1.77 billion or over Rs 11,400 crore.
The key accused in the case were jeweler and designer Nirav Modi, his maternal uncle Mehul Choksi, and other relatives and some PNB employees.
Nirav Modi and his relatives escaped India in early 2018, days before the news of the scam became public.
PNB scam has been dubbed as the biggest fraud in India's banking history.
This document summarizes the securities scam orchestrated by Harshad Mehta in India during 1991-1992. Mehta exploited loopholes in the banking system to divert funds from banks to stockbrokers, who used the money to speculate in the stock market and artificially inflate share prices. Key tactics included using ready forwards, payment checks, and fake bank receipts to obtain unsecured loans from banks which were then used to purchase stocks. This lack of oversight and controls in the banking system allowed Mehta to siphon off over 4,000 crore rupees, triggering a stock market bubble.
- Satyam was a major Indian IT company founded in 1987 by Ramalinga Raju that grew to have over 40,000 employees and $2.1 billion in revenue.
- In 2009, Ramalinga Raju resigned as chairman after admitting to a long-running accounting fraud where he had inflated profits and cash balances by over $1 billion.
- The fraud involved creating fake bank accounts and diverting funds to family businesses. It came to light after a whistleblower's email and led to the arrest of Raju and others.
- After the fraud was discovered, Satyam was acquired by Tech Mahindra and continues operations today after a major restructuring.
Harshad Mehta exploited loopholes in the banking system in 1992 to siphon off funds from inter-bank transactions and use the money to trigger a rise in stock prices. He did this through fake bank receipts issued by complicit banks that allowed him to acquire money, which he used to purchase shares and drive up prices. When the scheme was exposed by a journalist, banks demanded repayment, causing banks and individuals to lose money. Mehta was later charged with multiple criminal offenses and civil suits, and although he raised further controversy by claiming to bribe politicians, he ultimately died in prison in 2001 while serving time for financial crimes.
Harshad Mehta engaged in a massive stock market manipulation scam in 1992 in India. He took advantage of loopholes in the banking system to siphon off Rs. 3500 crores, which he used to invest in inflating stock prices. However, the scam was exposed when the State Bank of India reported a shortfall in government securities. This led to an investigation revealing Mehta's manipulation and caused the stock market to crash by 72%. Mehta was later charged with multiple criminal offenses and civil suits for his role in the scam.
1) 11400 Crores Fraud
2) Nirav Modi, the billionaire jeweler who along with others scammed Punjab National Bank (PNB) of over 11400 crore’s has fled the country.
3) Apparently Nirav modi spotted in which placeWE DON’T KNOWBut What exactly is this scam?
4) The CBI has registered a case against Nirav Modi on January 29. Punjab National Bank registered a case against Nirav Modi, His Brother Neeshal & His Uncle Mehul Choksi on February 13.
5) The Bank initially reported a scam of rupees 280 crores. But it was later realized to be rupees 11400 crores. This is a lot of money. So how does one get away with a scam of such magnitude? Possibly it is one of the biggest in Indias’s banking history.
6) Nirav Modi is an importer of diamonds. Basically importers prefer to take loans in foreign currencies as interest rates on that are lower. In this case a loan that is taken from any overseas bank guaranteed by PNB. Then what Modi had to do was approach PNB & ask for buyers credit?In order to do this PNB had to issue a “letter Of Undertaking” to an overseas bank. Basically LoU guarantees an overseas bank that if it gives money for a specified period to identified by the home bank (in this case PNB) then the home bank will assure that the money will be returned to the overseas bank.
7) Most of these overseas banks are Indian Banks with foreign branches. So the overseas bank directly give to loan PNB not Nirav Modi. An account has to create by PNB called a NOSTRO account where the overseas bank gives the loan.
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.
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More.........
Harshad Mehta was an Indian stockbroker born in 1953 who triggered a securities scam in 1992 by diverting Rs. 4,000 crore from banks to inflate stock prices. He took advantage of loopholes in the banking system to siphoned money and bought shares, artificially raising prices. His actions were later exposed, causing the stock market to crash and devastating many investors. Mehta was charged with 72 criminal offenses and banned from trading, and his actions highlighted issues with regulation and oversight in the financial system.
ppt on Nirav Modi or PNB scam with all details till 2020
the data is collected from Wikipedia, articles, and videos available on youtube and other platforms.
Harshad Mehta used loopholes in the banking system in the early 1990s to divert funds of Rs. 4,000 crore from various banks and trigger a spike in the SENSEX. As a stockbroker, he exploited the ready forward system and issued fake bank receipts to borrow funds without proper collateral. His scam was exposed by journalist Sucheta Dalal in 1992 and resulted in reforms to tighten regulation of the stock market and banking system in India. Mehta was later arrested and banned from the stock market for over 70 criminal offenses related to misappropriation of funds.
A Report on the Punjab National Bank Scam (Nirav Modi)Yohan DSouza
Nirav Modi, a wealthy Indian businessman, is alleged to have defrauded Punjab National Bank of $1.77 billion through the illegal issuance of fraudulent Letters of Understanding. An investigation revealed that multiple PNB employees issued fake LoUs over several years, allowing Modi's companies to take large loans from other banks that they did not pay back. The fraud went undetected by PNB due to a lack of integration between their core banking system and the SWIFT network, which allowed the fake LoU transactions to be made without being recorded. PNB has now reported the fraud to authorities and may have to repay the liabilities owed to other banks that were deceived into providing the loans. The case has dealt a
1) The document summarizes the Satyam scam, where the chairman of Satyam Computers, Ramalinga Raju, admitted to a corporate fraud of over Rs. 7,800 crore by falsifying the company's accounts.
2) Raju and his brother were arrested on charges of breach of trust, cheating, and falsification of records. It was found that Raju had inflated profits, understated liabilities, and diverted funds to his family's companies.
3) The fraud had major impacts, including Satyam losing partnerships, employees facing uncertainty over salaries, and hundreds of employees being stranded overseas after contracts were canceled. In the end, Tech Mahindra acquired Satyam Computers
The document summarizes several stock market scams that have occurred in India, including the Ketan Parekh scam of 2001 and the Harshad Mehta scam of 1992. The Ketan Parekh scam involved diverting over Rs. 3500 crores from banks to finance stock market operations through price manipulation. Ketan Parekh raised funds through various methods and then used the shares as collateral to obtain more loans, causing losses when share prices fell. The Harshad Mehta scam in 1992 rigged prices of several stocks and siphoned Rs. 4,000 crores from the banking system through fake transactions, eroding over Rs. 5,000 crores from the stock market. Both scams shook investor confidence
Harshad Mehta and Ketan Parekh orchestrated major stock market scams in India in the 1990s and early 2000s. Harshad Mehta used ready forward deals and fake bank receipts to divert Rs. 4000 crore in 1992. Ketan Parekh manipulated the prices of 10 stocks through circular trading and fake pay orders in 1999-2001, moving Rs. 64,000 crore. Both scams significantly impacted the stock market and led to reforms such as banning naked short sales and collateralized lending only through exchanges. Mehta and Parekh were arrested and banned from trading, but their scams exposed loopholes that were subsequently addressed.
Harshad Mehta was an Indian stockbroker charged with numerous financial crimes in the 1992 securities scam. He exploited loopholes in the banking system to siphon funds from inter-bank transactions and manipulate stock prices. When exposed, it was found that Mehta misappropriated over $800 million through fraudulent transactions. The scam had widespread impacts, including a sharp drop in stock prices, lawsuits, and increased scrutiny of the financial system and liberalization policies. Mehta was convicted on one charge and died in 2001 while other trials were still ongoing.
Harshad Mehta used loopholes in the banking system in the early 1990s to divert Rs 4000 crore and manipulate stock prices in what became known as the Harshad Mehta securities scam. He used instruments like ready forward deals and fake bank receipts to carry out the fraud. The scam had major impacts, including stalling economic reforms and causing losses for banks. Mehta was later arrested and banned from stock trading, facing over 600 lawsuits. The scam exposed weaknesses in the financial system and led to regulatory changes to strengthen oversight of markets.
The Satyam corporate fraud involved the founder of Satyam Computers, B. Ramalinga Raju, falsely reporting $1.47 billion in assets that did not exist. Raju and others were arrested for fraud, conspiracy, and violating insider trading laws. The scam had major impacts, including dragging down stock market indices and reducing Satyam's stock price significantly. After the scam, Mahindra group acquired Satyam and it was later merged with Tech Mahindra.
Harshad Mehta was a stockbroker born in 1954 who orchestrated a securities scam in the early 1990s that diverted 4000 crore rupees from banks to stockbrokers using loopholes in the banking system. He manipulated the stock market by misappropriating over 2.8 million shares in around 90 companies. The scam had major effects, including losses for the banking system, many bankrupt investors, and a sharp fall in stock prices. Mehta was arrested in 1992 and convicted in 1999, receiving a 5-year prison sentence, but he died in prison in 2001 at the age of 47 from heart issues.
This document discusses Vijay Mallya and Kingfisher Airlines' default on over Rs. 9,000 crore in loans to banks. It details Mallya's business empire and the rise and fall of Kingfisher Airlines, which began operations in 2005 but struggled due to high costs and prices. While Mallya has offered to pay back Rs. 4,000 crore, banks have only recovered around Rs. 1,600 crore by selling collateral such as shares in United Spirits. The document also analyzes loopholes in laws like SARFAESI that have hindered further recovery from Mallya.
A case study on how Harshad Mehta scammed the entire stock market. There are certain examples and history on how he played a role as a stockbroker.
The underlined and highlighted words can be googled to further more enhance your knowledge.
HDFC Bank is one of the major private sector banks in India. It was established in 1994 and is headquartered in Mumbai. The bank has over 5,000 branches and ATMs across India that serve corporate and retail customers. HDFC Bank aims to be a world-class bank through high quality customer service, innovative products, and leveraging new technologies. It has experienced significant growth and received several awards for its performance and services.
Satyam was a major Indian IT company that engaged in a major accounting scandal in 2009. The company chairman, B. Ramalinga Raju, admitted to inflating the company's cash balances, revenues, and profits over several years. This resulted in a loss of billions of dollars in shareholder wealth. In response, the government took over Satyam's board and launched investigations by multiple regulators. Eventually, Tech Mahindra acquired Satyam to restore investor confidence and provide stability to employees. New rules on corporate governance and oversight were also introduced in the aftermath of the Satyam fraud scandal.
Reebok was founded in England in 1895 and renamed in 1958. It was purchased by Paul Fireman in 1979 who later bought the parent company in 1984. Reebok creates sports products and focuses on fitness and training through its R&D department. It has a diverse product line including shoes, apparel, equipment and health items. Reebok uses marketing strategies like promotion, pricing and place to target its athletic customers.
The document summarizes the merger between sports giants Reebok and Adidas in an effort to challenge Nike's dominance. It describes how Adidas acquired Reebok in 2005 to create a stronger competitor. It also provides background on each company and how they worked to improve their information systems over time, such as Reebok implementing new software to better communicate internally and with customers.
This document summarizes the securities scam orchestrated by Harshad Mehta in India during 1991-1992. Mehta exploited loopholes in the banking system to divert funds from banks to stockbrokers, who used the money to speculate in the stock market and artificially inflate share prices. Key tactics included using ready forwards, payment checks, and fake bank receipts to obtain unsecured loans from banks which were then used to purchase stocks. This lack of oversight and controls in the banking system allowed Mehta to siphon off over 4,000 crore rupees, triggering a stock market bubble.
- Satyam was a major Indian IT company founded in 1987 by Ramalinga Raju that grew to have over 40,000 employees and $2.1 billion in revenue.
- In 2009, Ramalinga Raju resigned as chairman after admitting to a long-running accounting fraud where he had inflated profits and cash balances by over $1 billion.
- The fraud involved creating fake bank accounts and diverting funds to family businesses. It came to light after a whistleblower's email and led to the arrest of Raju and others.
- After the fraud was discovered, Satyam was acquired by Tech Mahindra and continues operations today after a major restructuring.
Harshad Mehta exploited loopholes in the banking system in 1992 to siphon off funds from inter-bank transactions and use the money to trigger a rise in stock prices. He did this through fake bank receipts issued by complicit banks that allowed him to acquire money, which he used to purchase shares and drive up prices. When the scheme was exposed by a journalist, banks demanded repayment, causing banks and individuals to lose money. Mehta was later charged with multiple criminal offenses and civil suits, and although he raised further controversy by claiming to bribe politicians, he ultimately died in prison in 2001 while serving time for financial crimes.
Harshad Mehta engaged in a massive stock market manipulation scam in 1992 in India. He took advantage of loopholes in the banking system to siphon off Rs. 3500 crores, which he used to invest in inflating stock prices. However, the scam was exposed when the State Bank of India reported a shortfall in government securities. This led to an investigation revealing Mehta's manipulation and caused the stock market to crash by 72%. Mehta was later charged with multiple criminal offenses and civil suits for his role in the scam.
1) 11400 Crores Fraud
2) Nirav Modi, the billionaire jeweler who along with others scammed Punjab National Bank (PNB) of over 11400 crore’s has fled the country.
3) Apparently Nirav modi spotted in which placeWE DON’T KNOWBut What exactly is this scam?
4) The CBI has registered a case against Nirav Modi on January 29. Punjab National Bank registered a case against Nirav Modi, His Brother Neeshal & His Uncle Mehul Choksi on February 13.
5) The Bank initially reported a scam of rupees 280 crores. But it was later realized to be rupees 11400 crores. This is a lot of money. So how does one get away with a scam of such magnitude? Possibly it is one of the biggest in Indias’s banking history.
6) Nirav Modi is an importer of diamonds. Basically importers prefer to take loans in foreign currencies as interest rates on that are lower. In this case a loan that is taken from any overseas bank guaranteed by PNB. Then what Modi had to do was approach PNB & ask for buyers credit?In order to do this PNB had to issue a “letter Of Undertaking” to an overseas bank. Basically LoU guarantees an overseas bank that if it gives money for a specified period to identified by the home bank (in this case PNB) then the home bank will assure that the money will be returned to the overseas bank.
7) Most of these overseas banks are Indian Banks with foreign branches. So the overseas bank directly give to loan PNB not Nirav Modi. An account has to create by PNB called a NOSTRO account where the overseas bank gives the loan.
.
.
.
.
.
More.........
Harshad Mehta was an Indian stockbroker born in 1953 who triggered a securities scam in 1992 by diverting Rs. 4,000 crore from banks to inflate stock prices. He took advantage of loopholes in the banking system to siphoned money and bought shares, artificially raising prices. His actions were later exposed, causing the stock market to crash and devastating many investors. Mehta was charged with 72 criminal offenses and banned from trading, and his actions highlighted issues with regulation and oversight in the financial system.
ppt on Nirav Modi or PNB scam with all details till 2020
the data is collected from Wikipedia, articles, and videos available on youtube and other platforms.
Harshad Mehta used loopholes in the banking system in the early 1990s to divert funds of Rs. 4,000 crore from various banks and trigger a spike in the SENSEX. As a stockbroker, he exploited the ready forward system and issued fake bank receipts to borrow funds without proper collateral. His scam was exposed by journalist Sucheta Dalal in 1992 and resulted in reforms to tighten regulation of the stock market and banking system in India. Mehta was later arrested and banned from the stock market for over 70 criminal offenses related to misappropriation of funds.
A Report on the Punjab National Bank Scam (Nirav Modi)Yohan DSouza
Nirav Modi, a wealthy Indian businessman, is alleged to have defrauded Punjab National Bank of $1.77 billion through the illegal issuance of fraudulent Letters of Understanding. An investigation revealed that multiple PNB employees issued fake LoUs over several years, allowing Modi's companies to take large loans from other banks that they did not pay back. The fraud went undetected by PNB due to a lack of integration between their core banking system and the SWIFT network, which allowed the fake LoU transactions to be made without being recorded. PNB has now reported the fraud to authorities and may have to repay the liabilities owed to other banks that were deceived into providing the loans. The case has dealt a
1) The document summarizes the Satyam scam, where the chairman of Satyam Computers, Ramalinga Raju, admitted to a corporate fraud of over Rs. 7,800 crore by falsifying the company's accounts.
2) Raju and his brother were arrested on charges of breach of trust, cheating, and falsification of records. It was found that Raju had inflated profits, understated liabilities, and diverted funds to his family's companies.
3) The fraud had major impacts, including Satyam losing partnerships, employees facing uncertainty over salaries, and hundreds of employees being stranded overseas after contracts were canceled. In the end, Tech Mahindra acquired Satyam Computers
The document summarizes several stock market scams that have occurred in India, including the Ketan Parekh scam of 2001 and the Harshad Mehta scam of 1992. The Ketan Parekh scam involved diverting over Rs. 3500 crores from banks to finance stock market operations through price manipulation. Ketan Parekh raised funds through various methods and then used the shares as collateral to obtain more loans, causing losses when share prices fell. The Harshad Mehta scam in 1992 rigged prices of several stocks and siphoned Rs. 4,000 crores from the banking system through fake transactions, eroding over Rs. 5,000 crores from the stock market. Both scams shook investor confidence
Harshad Mehta and Ketan Parekh orchestrated major stock market scams in India in the 1990s and early 2000s. Harshad Mehta used ready forward deals and fake bank receipts to divert Rs. 4000 crore in 1992. Ketan Parekh manipulated the prices of 10 stocks through circular trading and fake pay orders in 1999-2001, moving Rs. 64,000 crore. Both scams significantly impacted the stock market and led to reforms such as banning naked short sales and collateralized lending only through exchanges. Mehta and Parekh were arrested and banned from trading, but their scams exposed loopholes that were subsequently addressed.
Harshad Mehta was an Indian stockbroker charged with numerous financial crimes in the 1992 securities scam. He exploited loopholes in the banking system to siphon funds from inter-bank transactions and manipulate stock prices. When exposed, it was found that Mehta misappropriated over $800 million through fraudulent transactions. The scam had widespread impacts, including a sharp drop in stock prices, lawsuits, and increased scrutiny of the financial system and liberalization policies. Mehta was convicted on one charge and died in 2001 while other trials were still ongoing.
Harshad Mehta used loopholes in the banking system in the early 1990s to divert Rs 4000 crore and manipulate stock prices in what became known as the Harshad Mehta securities scam. He used instruments like ready forward deals and fake bank receipts to carry out the fraud. The scam had major impacts, including stalling economic reforms and causing losses for banks. Mehta was later arrested and banned from stock trading, facing over 600 lawsuits. The scam exposed weaknesses in the financial system and led to regulatory changes to strengthen oversight of markets.
The Satyam corporate fraud involved the founder of Satyam Computers, B. Ramalinga Raju, falsely reporting $1.47 billion in assets that did not exist. Raju and others were arrested for fraud, conspiracy, and violating insider trading laws. The scam had major impacts, including dragging down stock market indices and reducing Satyam's stock price significantly. After the scam, Mahindra group acquired Satyam and it was later merged with Tech Mahindra.
Harshad Mehta was a stockbroker born in 1954 who orchestrated a securities scam in the early 1990s that diverted 4000 crore rupees from banks to stockbrokers using loopholes in the banking system. He manipulated the stock market by misappropriating over 2.8 million shares in around 90 companies. The scam had major effects, including losses for the banking system, many bankrupt investors, and a sharp fall in stock prices. Mehta was arrested in 1992 and convicted in 1999, receiving a 5-year prison sentence, but he died in prison in 2001 at the age of 47 from heart issues.
This document discusses Vijay Mallya and Kingfisher Airlines' default on over Rs. 9,000 crore in loans to banks. It details Mallya's business empire and the rise and fall of Kingfisher Airlines, which began operations in 2005 but struggled due to high costs and prices. While Mallya has offered to pay back Rs. 4,000 crore, banks have only recovered around Rs. 1,600 crore by selling collateral such as shares in United Spirits. The document also analyzes loopholes in laws like SARFAESI that have hindered further recovery from Mallya.
A case study on how Harshad Mehta scammed the entire stock market. There are certain examples and history on how he played a role as a stockbroker.
The underlined and highlighted words can be googled to further more enhance your knowledge.
HDFC Bank is one of the major private sector banks in India. It was established in 1994 and is headquartered in Mumbai. The bank has over 5,000 branches and ATMs across India that serve corporate and retail customers. HDFC Bank aims to be a world-class bank through high quality customer service, innovative products, and leveraging new technologies. It has experienced significant growth and received several awards for its performance and services.
Satyam was a major Indian IT company that engaged in a major accounting scandal in 2009. The company chairman, B. Ramalinga Raju, admitted to inflating the company's cash balances, revenues, and profits over several years. This resulted in a loss of billions of dollars in shareholder wealth. In response, the government took over Satyam's board and launched investigations by multiple regulators. Eventually, Tech Mahindra acquired Satyam to restore investor confidence and provide stability to employees. New rules on corporate governance and oversight were also introduced in the aftermath of the Satyam fraud scandal.
Reebok was founded in England in 1895 and renamed in 1958. It was purchased by Paul Fireman in 1979 who later bought the parent company in 1984. Reebok creates sports products and focuses on fitness and training through its R&D department. It has a diverse product line including shoes, apparel, equipment and health items. Reebok uses marketing strategies like promotion, pricing and place to target its athletic customers.
The document summarizes the merger between sports giants Reebok and Adidas in an effort to challenge Nike's dominance. It describes how Adidas acquired Reebok in 2005 to create a stronger competitor. It also provides background on each company and how they worked to improve their information systems over time, such as Reebok implementing new software to better communicate internally and with customers.
Adidas acquired Reebok in 2006 for $3.52 billion to gain market share in the US and better compete with Nike. While synergies were estimated between distribution, R&D, and operating efficiencies, integration issues arose from differing corporate cultures and brand strategies. Post-integration results were mixed as Reebok sales declined, though the companies realized some synergies. By 2007, margins had dropped and the merger was deemed only partially successful, though profits remained. Adidas continued investing in Reebok's turnaround.
This document provides a marketing analysis of Reebok India's marketing strategy. It discusses Reebok's history in India since 1995 and describes its current product lines including shoes (ReeTone, ReeGym, ReeZig, ReeTrain), apparel, and a kids line (Reebok Junior). It also analyzes the 4Ps of Reebok's marketing mix: products, price, promotion through celebrity endorsements, and placement through its retail stores. The analysis is submitted to a marketing professor for review.
Global Trust Bank collapsed in 2004 due to unethical practices of its promoters including connections to a stock scam, misleading financial reports, and excessive risky lending. The Reserve Bank of India was criticized for its slow response despite knowing of problems as early as 2001. GTB was eventually merged with Oriental Bank of Commerce after its net worth turned negative and capital adequacy ratio fell, in an effort by regulators to protect depositors. However, the failure of GTB also highlighted shortcomings in banking regulation and oversight in India at the time.
The document discusses the rise and fall of the Indian retail chain Subhiksha. It provides details on Subhiksha's business model, expansion plans, and reasons for its decline. Subhiksha grew rapidly in the 2000s but overextended itself, experiencing a liquidity crisis. It shut down operations in 2009 due to huge debt, poor inventory management, and increased competition. The document recommends revival strategies such as improving store quality, diversifying products, and prioritizing equity over debt financing.
Reebok is a global sportswear brand founded in England in 1895 that was acquired by Adidas in 2006. It contributes 18% of Adidas group sales led by CEO Uli Becker. In 2012, Reebok India filed fraud charges against its former MD Subhinder Singh Prem and COO Vishnu Bhagat for alleged fraud of Rs. 870 crore. This led to investigations by authorities and the resignation of Reebok India's brand director Sajid Shamim.
The document summarizes steps taken by Adidas after acquiring Reebok to integrate the two organizations successfully. It discusses:
1) Adidas created a "clean team" to handle integration and appointed managers from Adidas to key positions at Reebok to analyze management.
2) Adidas implemented a communication strategy to alleviate employee fears, including the CEO visiting Reebok headquarters and creating an intranet site to regularly update employees.
3) Adidas communicated that the acquisition was not aimed at job cuts and there would be continued investment in Reebok headquarters.
1) In 2005, Adidas acquired Reebok in a friendly $3.8 billion merger to become the second largest sportswear company.
2) The merger aimed to allow Adidas and Reebok to operate as separate entities while strengthening their position against Nike in the US and European markets.
3) The acquisition was expected to give both companies access to new markets and reduced costs through shared technology, patents, and resources.
1) Adidas acquired Reebok in 2005 for 3.1 billion euros to gain a stronger foothold in the US market and better compete with Nike.
2) At the time of the merger, Nike had 36% of the US athletic shoe market, while Adidas and Reebok had 8.9% and 12.2% respectively.
3) The merger combined Adidas' strength in higher-end performance shoes with Reebok's focus on the middle market, but integrating their different cultures posed challenges to realizing the benefits of the deal.
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CPAs responsibilities to detect fraud in audits, required approaches, types of financial statement frauds and specific case examples of different types of financial statement fraud
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The three major financial Scams that shook the economy of India and Financial sector,
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- Saradha chit fund embezzlement
This pdf briefly explains how the scams were unearthed and brought to light.
The document describes the securities scam perpetrated by Harshad Mehta in India in 1992. It details how Mehta exploited loopholes in the banking system, specifically ready forward deals and broker-intermediated settlements, to divert over 3,500 crore rupees from banks to stockbrokers. This allowed brokers to access funds through account payee cheques meant for other banks and use them to purchase shares and drive up stock prices. The scam uncovered widespread mismanagement and inflating of accounts at banks.
John Cryan has been named the new CEO of Deutsche Bank, replacing Anshu Jain. Wadia Group is selling its last textile manufacturing unit in Pune to Oasis Procon for Rs 230 crore. NRI deposits in Kerala crossed Rs 1 lakh crore last financial year according to the state level bankers committee. SpiceJet unveiled its new logo and slogan 'Red. Hot. Spicy' as part of its 10th anniversary celebrations. Milk Mantra is launching a dairy-based health beverage called MooShake in Bengaluru and plans to expand to other cities.
1) Big Bazaar has used the tetra threat framework for sustainability analysis which examines four threats: imitation, substitution, holdup, and slack.
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A project report on comparative analysis of demat account and online tradingProjects Kart
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The Indian retail and franchising market is growing rapidly due to rising incomes and an expanding middle class. By 2025, India will become the fifth largest consumer market globally, surpassing Germany. There are significant opportunities for US companies in sectors like retail, education, apparel, food services, and healthcare. India has over 300 malls and 1,500 supermarkets, and retail is expanding beyond major cities into smaller towns. Major international brands are entering India through partnerships, joint ventures, and franchise agreements. Virtus Global Partners provides advisory services to help US companies capitalize on opportunities in the Indian market.
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Satyam and Nirav Modi Scam ( case study) by Karan SetiaKaran Setia
Nirav Modi and associates defrauded Punjab National Bank of $4 billion through fraudulent letters of undertaking. Modi grew his diamond business significantly over the years and had stores globally before the scam was discovered in 2018. He inflated diamond prices by purchasing and reselling diamonds at higher prices and set up shell companies. The scam involved corrupt bank officials issuing LoUs without proper processes or collateral to fund Modi's international operations. When new officials asked for collateral, the scam was uncovered. Modi fled to London and is fighting extradition to India.
Adidas merged with Reebok in 2005 for $3.8 billion to compete with Nike. While the merger aimed to boost sales growth through greater market share in the US and Europe, some analysts were skeptical about the ability to successfully integrate two separate brand identities. The case highlights the rationale for the merger between Adidas and Reebok, and whether combining the companies would allow them to displace Nike as the industry leader.
Gitanjali Gems, an Indian jewellery company, has hired consulting firm KPMG to help restructure its five major businesses, which include manufacturing, brands, retail stores, construction, and international retail. The company plans to explore mergers, demergers, spin-offs or acquisitions with the goal of enhancing shareholder value. Its share price closed flat after the announcement was made after market hours.
Reliance Retail Ltd is a subsidiary of Reliance Industries Ltd that entered the retail sector in 2006. It has various store formats including supermarkets (Reliance Fresh, Reliance Super), general merchandise stores (Reliance Mart), and consumer electronics stores (Reliance Digital). Reliance Retail saw revenue growth of 21.2% in the previous year and aims to increase its reach through store expansion. It operates over 2,600 stores across 200 cities in India, focusing on value, lifestyle, and digital sectors.
This document provides an overview of foreign direct investment (FDI) policies related to the retail sector in India. It discusses how FDI in retail is currently only allowed in cash-and-carry wholesale trading and single-brand retail. Multi-brand retail remains prohibited. The document also examines concerns around partially opening the retail sector to FDI, such as potential job losses for small retailers and an underdeveloped domestic retail sector. It notes limitations of the current system like a lack of infrastructure for storage and transportation.
1. The document provides an organizational study of Big Bazaar, a large retail chain in India, focusing on its store in Madurai.
2. It outlines the objectives and scope of the study, which is to understand Big Bazaar's retail operations and functions, specifically HR.
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A select set of project management best practices to keep your project on-track, on-cost and aligned to scope. Many firms have don't have the necessary skills, diligence, methods and oversight of their projects; this leads to slippage, higher costs and longer timeframes. Often firms have a history of projects that simply failed to move the needle. These best practices will help your firm avoid these pitfalls but they require fortitude to apply.
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Adidas and Reebok scandals
1. ADIDAS AND
REEBOK SCANDAL
Introduction
It was late March and Prem, 44, the former managing director of
Reebok’s Indian entity was in Phoenix, Arizona, for a bi-annual
meeting to present the company’s business plan for the fast-
growing Indian market. Reebok’s India businesses were to be
downsized in 2012 and, though there were differences between
Prem and his boss Ronald Auschel on how swift the downsizing
should be, Prem believed he’d managed to do the balancing act
needed to stay at the helm. Instead, he was asked to summarily
step aside.
A month later, on April 30, in an earnings release, Adidas would
announce exceptional sales and profits in its global operations.
Those results were overshadowed by what the company termed
as ‘commercial irregularities’ in its Indian operations. It said the
company would be taking a euro 125 million write-off and
restating its results for the year 2010. It asked investors to brace
for a further euro 70 million write-off. A week later, the company
filed a criminal complaint against Prem. Prem hit back with two
cases—one for defamation and another for recovery of his past
dues amounting to Rs 12.7 crore in the Delhi High Court.
2. The Delhi High Court is expected to hear the cases in July. Unless
both parties eventually arrive at an out-of-court settlement,
there’s every chance that the last has not been heard on this rather
unexpected high-voltage drama inside the world’s second largest
sports shoemaker.
So what really led to a sudden escalation of hostilities between
the swashbuckling go-getting Indian executive and a highly
conservative German multinational? Was it merely a clash of
corporate cultures, given that Prem belonged to the erstwhile
Reebok set-up which Adidas bought out in 2005? Or was he
penalised for repeatedly questioning the Adidas system which
prided itself on conformity and discipline?
In what could the second biggest corporate scandal after Satyam,
Reebok India has alleged a Rs 8,700 crore fraud by its former
Managing Director Subhinder Singh Prem and former Chief
Operating Officer Vishnu Bhagat.
Reebok lodged an FIR with the Gurgaon police alleging that Prem
and Bhagat had 'stolen' products by setting up 'secret
warehouses', fudged accounts and indulged in fictitious sales to
cause a multi-crore dent to the company.
When the alleged scam came to light in March 2012, Singh, who
had been made the Managing Director of Adidas India in 2011 as
a part of an integration of the businesses of both Adidas and
Reebok brands, was dismissed from the company. Bhagat's
services were terminated too.
The company's financial director, Shahim Padath, later lodged a
formal complaint against the duo. The economic cell of Gurgaon
3. police conducted a probe and found that Singh and Bhagat had
allegedly rented four warehouses without informing their seniors
and used them to store goods and claimed they were supplied to
genuine dealers.
They also allegedly siphoned off goods to ghost companies and
distributors across the country, claiming they were defective
pieces.
Before we delve into the answers, let’s first start at the beginning
what happened exactly?
Reebok’s rise in India reads like a fairytale success story. Globally,
the brand ranks a distant fourth after Nike, Adidas and Puma,
but in India it had built up an impressive network of over a 1,000
stores by 2012 and is the market leader. As Prem explains in an
interview with Forbes India, “The reason why we grew was that
yes we were looking at distribution. We believed in the spirit of
the Indian market. We were in 325 cities. We had over a 1,000
stores.” In pursuing this aggressive expansion, he says he had the
support of global headquarters and Reebok had innovated with
products, price points and distribution all of which resulted in
making it the largest sportswear brand in India with sales of
about Rs 700 crore.
4. When Reebok opened its first
store in Delhi in 1996, under the
leadership of Mukhtesh Pant, it
took a leaf out of a concept
pioneered by Benetton in India: It
promised a minimum guarantee
to its franchisee. “The whole idea
of a minimum guarantee is that
the company is convinced that
the retailer will make money, but
the retailer is not convinced,”
says Harminder Sahni, managing
director, Wazir Advisors. Since
then, the concept of a minimum
guarantee has become an
industry practice. So the moot
question: Why did Prem face so much flak for it from Adidas’
global HQ in Germany?
It may have had to do with the fact that sports goods companies
around the world follow an entirely different model: They rely on
the wholesaler. The company sells its goods on a 44-45 percent
margin to a wholesaler, who is then responsible for selling them.
He could set up stores or could sell them to smaller franchisees,
but the key point is that the wholesaler is responsible for anything
that doesn’t sell. The rewards are his, but the risk is also his once
the goods are off the company balance sheet. Globally, these
wholesalers would decide when to plan stock clearances, how
long to have the sale for, how much to discount goods and so
on—all decisions that are typically taken by companies in India.
5. Now in India, the situation was very different. With an
underdeveloped retail market, Reebok realised that there were
few wholesalers of repute that they could deal with. Remember
Reebok was the first international sports goods company looking
to set shop in India at a time when few Indians could afford to
pay Rs 2,000 for a pair of shoes. Understandably, individual shop
owners were also wary of buying expensive merchandise that
may or may not sell. Their risk had to be balanced out.
One way of doing this was to compensate them for their costs. In
exchange, the company would balance their upside. So Reebok
entered into deals with individual shop owners that took care of
their rental and staff expenses. There were also instances when
companies were forced to enter into minimum guarantee
agreements at prime retail locations where the shop owners had
the upper hand and could demand their pound of flesh. In return,
the maximum profit these shops could make was capped at 30
percent. Reebok guided them on how to buy and sell, trained the
staff and also planned the store fit-outs. It also supported them
with strong promotional budgets.
Industry watchers say that where Reebok slipped up was in
selecting the right partners. Some shop owners had no interest in
selling shoes and treated it purely as a financial investment that
fetched a good return. In its aggression to expand in the
marketplace, Reebok ended up opening too many outlets in areas
that could only support one or at most two.
Adidas too, relied partly on the minimum guarantee model to
drive its distribution reach. And even after Adidas bought
Reebok for $3.8 billion in 2005, both brands learned to live with
this Indian reality. But things start to unravel by 2010.
6. The Conflict
A forensic audit of Reebok India Co. has found fake transactions
with unauthorized customers, allegedly concocted to exaggerate
the company’s revenue and possibly aimed at meeting targets.
It also shed new light on a messy affair that is being investigated
by both the Gurgaon Police and the Serious Fraud Investigation
Office (SFIO), an arm of the ministry of corporate affairs.
The audit, conducted by the German arm of Ernst and Young
(E&Y), shows transactions between Reebok India and companies
owned by Sanjeev Mishra, who ran a staffing services company
7. that supplied contract employees to the shoemaker, among other
circuitous and complex transactions.
Mint has seen a copy of the audit report.
The audit also shows leakages in some transactions that seem to
have benefited various individuals or other entities. However, it
is silent on the exact gains derived by the main accused.
E&Y declined to comment on the matter.
Adidas AG acquired Reebok International Ltd, the parent of
Reebok India, in 2005. In May this year, Adidas claimed it had
uncovered a fraud of the magnitude of Rs.870 crore at the Indian
operations of Reebok. Since then, 12 people, either former
employees of Reebok India, including its former managing
director Shubhinder Singh Prem and former chief operating
officer Vishnu Bhagat (the two are the main accused), or
associates like Mishra, have been arrested.
Prem and Bhagat left the company on 26 March.
Praveen Agarwal, the lawyer representing both Prem and Bhagat,
said his clients deny “any findings in the E&Y report” that hold
them responsible for any loss to Reebok India.
Mishra’s lawyer Harish Bharadwaj declined comment because
“the matter is pending in court”.
A spokesperson for Reebok India said the exact gains of the two
main accused are yet to be assessed.
“The falsification of accounts at RIC (Reebok India) will result in a
restatement of the prior year financial results of the Adidas
Group of €125 million. There has been no change to these
previously reported numbers. Due to the poor state of the
8. customer accounts, reconciliations are taking much longer than
anticipated. As a result, the exact amount of the restatement
cannot yet be determined. The financial gains attributed to the
two accused have not yet been fully deciphered,” she said in a
mail.
In its original complaint to the Gurgaon Police, Adidas offered a
break-up of theRs.870 crore number: Rs.530 crore on account of
so-called parallel accounting that inflated sales, which were not
passed on to the company; Rs.147 crore in goods invoiced but not
dispatched; Rs.63 crore in goods returned and pending
inspection;Rs.0.9 crore on account of secret warehouse
bills, Rs.14.82 crore in interest lost on a franchisee referral
programme; and Rs.98 crore on account of payments to and from
customers (dealers and distributors).
Agarwal said the Rs.530 crore is a difference in “reconciliation”
and “as such, a non-monetary loss to the company”. The audit
report backs this.
Interestingly, as Mint reported on Monday, the Gurgaon Police
has arrived at a number of Rs.11.3 crore, and not Rs.870 crore,
after its investigations.
To be sure, this could be because the police is “essentially looking
at the criminal aspect”, according to an official at SFIO, who did
not want to be identified. This person added that his agency is
looking at the “accounting aspect” and that the lower estimate by
the police does not necessarily absolve the accused.
E&Y was appointed by Adidas to conduct the financial
audit. Mint couldn’t immediately ascertain the total value
assigned by it to the irregular transactions it discovered.
9. Agarwal claimed that the audit firm is being paid Rs.130 crore for
its services. Mintcouldn’t independently verify this number.
According to the E&Y report, around Rs.147.25 crore of goods
were “billed but not delivered” and stored in secret warehouses
owned by Shivam Enterprises and Oriya Sales, both owned by
Mishra.
Reebok India hired the warehouses in October 2009, and between
then and June 2012, paid a rent of Rs.1.43 crore.
On its books, Reebok showed the goods as having been sold to its
dealers and distributors, according to the forensic report—it even
had invoices—but it had no intention to deliver them, merely to
inflate sales.
The company, the report adds, also inflated sales by storing stock
returned by dealers and distributors in other designated (read: on
the book) warehouses, but simply chose not to account for them
for a long time. The forensic audit shows mail trails between
employees to the effect.
E&Y’s report also shows that Reebok India showed higher sales
revenue by effecting retrospective increases in the price of goods
already sold to dealers and distributors. This increased both the
sales revenue and the accounts receivable (or amount due from
dealers and distributors). These retrospective price increases
netted the company around Rs.86 crore, according to the report.
The firm also seems to have done some circular trading,
according to the report, selling goods to be repaired to Mishra’s
Shivam Enterprises and Oriya Sales forRs.35.2 crore, when their
value was actually lower by around Rs.14.3 crore. Interestingly, it
received only Rs.3.08 crore for these.
10. Some of these goods were further sold to dealers for Rs.3 crore by
the two companies, which also sold back the rest to Reebok India
through Om Trading, another Mishra-owned company,
for Rs.14.4 crore. And Reebok paid Rs.4.1 crore of the Rs.14.4
crore.
In effect, according to the report, Reebok received Rs.3.08 crore,
while paying Rs.4.1 crore. Mint couldn’t establish how the
company accounted for these transactions or whether its books
recognized the reduction in stock (since Shivam and Oriya sold
some goods) in the final leg.
In a similar transaction, Reebok India, the audit shows, also sold
defective goods worth Rs.21.5 crore to a company called KK
Enterprises as recently as December 2011, but actually moved
them to a secret warehouse from where some part was sold to
some unauthorized buyers.
These sales transactions to the unauthorized buyers were off the
books. The remaining goods were booked as sales returns in May
without accounting for the goods sold to the unidentified buyers.
The Gurgaon Police filed its charge-sheet in the case on 12
November. SFIO will submit its report to the ministry of
corporate affairs by 30 November, said the SFIO official quoted
above.
Investor Concern
A quick investigation and trial may help rebuild investor
confidence after India slipped to 46th place, behind Grenada,
among the 183 nations ranked for ease of doing business in the
World Bank’s 2012 “Doing Business Report.” It was 44th in 2011.
11. “Investors will be keeping an eye on the investigation and on
what would be the consequences for Reebok and other brands
there going forward,” said Mark Josefson, an analyst at Silvia
Quandt Research GmbH in Frankfurt, Germany. “It’s good that
Adidas quantified what the costs will be. The investigation
speeds up the planned reorganization process within India for the
Adidas Group at large.”
Adidas estimated last month that irregularities at Reebok India
may cost as much as 125 million euros ($155 million). Reebok
India filed the criminal complaint on behalf of Adidas. The parent
company operates about 900 Reebok franchise stores and about
700 Adidas licensed retailers in India.
The Economic Times newspaper reported earlier today the
Serious Fraud Investigation Office will investigate Reebok India.
The probe is the second conducted by the agency in the past 16
months involving an overseas company. Citigroup Inc. was
investigated in January 2011 after a local employee illegally
siphoned off almost $66 million from investors.
The Serious Fraud Investigation Office was set up under the
Ministry of Corporate Affairs to detect and prosecute fraud. It
consists of experts on subjects including accounting, taxation, law
and capital markets, according to its website.
Adidas AG’s Reebok business in India will be investigated by the
country’s anti-fraud agency for suspected accounting
irregularities, government officials said.
Adidas filed a criminal complaint on May 21 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 made allegations of fraudulent practices worth as
12. much as 8.7 billion rupees ($155 million), one person involved in
the inquiry said on May 23.
The Serious Fraud Investigation Office on May 29 was asked to
investigate the matter and submit a report within four or five
months, two government officials familiar with the matter said
today. They declined to be identified because they aren’t
authorized to speak publicly. Investigators may request more
information from Adidas’ headquarters in Herzogenaurach,
Germany, if needed, one of the people said.
“We don’t comment on pending investigations,” said Katja
Schreiber, a spokeswoman for Adidas. “We shall continue to
cooperate with the authorities in their investigation.”
Adidas shares gained 0.5 percent to 59.96 euros as of 11:41 a.m. in
Frankfurt. The stock has risen 19 percent this year, the second-
best performance in Germany’s benchmark DAX Index.
Experiencing Shoe-Bite
For over six years after Adidas acquired Reebok, the two
businesses in India operated as separate entities. The companies
had very different operating styles and management reported to
the US and Germany respectively. People who regularly
interacted with Reebok say that its American culture was more
aggressive, and bordering on brash.
Adidas, on the other hand, operated in a more disciplined
manner. Its employees went about scouting the market more
methodically. When Adidas also started using the minimum
guarantee approach about five years ago, its teams were
forbidden from deviating from certain minimum parameters
while negotiating these deals. Everything had to be approved by
its headquarters in Gurgaon. At Reebok, the teams could make a
13. business case for a store that would be approved later. This had
its downsides because there were allegations that some
employees took advantage of the system to indulge in corrupt
practices.
As a result, two things happened. Reebok grew rapidly. After
losing money in its initial years in India, Reebok managed to wipe
them out and closed its 2011 books with a profit of Rs 50 crore. It
paid out about Rs 120 crore in royalty. Annual sales stood at
about Rs 700 crore. Adidas, he says, has lost Rs 137 crore in the
time it has been in India and sells roughly Rs 450 crore worth of
shoes and merchandise every year.
In May 2011, Prem was appointed the India managing director of
the Reebok-Adidas combine. That’s when the cookie began to
crumble. The business was hit on multiple fronts. A hike in excise
duty on apparel, an increase in value added tax and a rupee that
swung between 49 and 54 to the dollar increased costs by Rs 100
crore. Sales declined and Reebok closed the year with Rs 650 crore
in sales.
The decline in the fortunes of the Indian operations was badly
timed. Under Route 2015, Adidas AG began to push for more
control over the Indian operations. While Prem was made
managing director, they insisted that finance be headed by
someone from within the Adidas fold. Shahin Padath was given
the task of integrating the finances of the two businesses in India.
It is unclear whether he approved last year’s financial statements.
The company declined to provide a specific answer. Late last
year, Adidas AG began to push for the appointment of Frederic
Serrant as sales director. Prem resisted because he felt a local was
better suited. But his bosses in Germany decided to send Serrant
to India to work on the Route 2015 project to downsize stores.
14. People familiar with the situation say what eventually did Prem
in was the high receivables on the books. They say that Reebok,
with its aggressive sales team, stuffed stock on retailers. “Stuffing
the retailer channel in this business is not uncommon,” says
Devangshu Dutta, chief executive, of Third Eyesight, a retail
consultancy. “The problem comes when sales slow [down].”
Prem agrees that the company’s receivables were high, but says
that all the stock was accounted for. This is probably the reason
why Adidas was keen on downsizing Reebok’s operations more
aggressively. When Prem refused he had to move on.
Conclusion
On the evening of March 25, Prem completed his review and was
told he should step aside so that Heckerott could take over. He
agreed and boarded a plane to India the next day reaching Delhi
on the 27th evening. On the 28th, he emailed his resignation.
Prem says the next day he received an email saying Adidas was
surprised he had resigned as he had been terminated for a reason.
Thereafter, he sent two emails in April asking Adidas what the
cause for his termination was only to be met with silence.
Meanwhile, Adidas asked KPMG, its auditors in India, to conduct
a forensic audit of its books. Their conclusion was unequivocal.
There were commercial irregularities in Reebok’s side of the
business that had to be dealt with. When contacted, KPMG
declined to comment.
On the morning of April 30, a few hours before the company
announced its annual results, the legal team at Adidas informed
Prem that he had been terminated due to commercial
irregularities. Adidas clarifies that it is not accusing him of
15. profiting personally, but declined to make available a copy of the
criminal complaint that it has filed with the Economic Offences
Wing of the Gurgaon Police. For now, Prem, who has filed two
cases against Adidas AG, says he plans to follow them to their
logical conclusion. He refuses to settle with his former employers.
“I have to fight for my honour.”
The Gurgaon Police filed its charge-sheet in the case on 12
November. SFIO will submit its report to the ministry of
corporate affairs by 30 November, said the SFIO official quoted
above.
Prem and Bhagat and the other executives have been in judicial
custody since September. They have been booked for falsification
of records, diversion of funds, causing loss to the company and
wrongful gain.
Foresight
Remembering last year's Rs 870 crore fraud at its arm Reebok
India as a 'thing in the past', Adidas India MD Eric Haskell has
said the company is now focused on building the brand and
driving growth.
"This (Reebok fraud) is deep in the past for us. We are focused on
growing the business. We have been busy with product launches
and new marketing activities in 2013," Adidas Group India
managing director Eric Haskell told
Adidas, which owns Reebok, had to take euro 211 million hit on
account of the fraud at Reebok India that was allegedly
committed by the company's former managing director
Shubhinder Singh Prem and former chief operating officer
Vishnu Bhagat. The matter is under investigation.
Haskell said the company has always co-operated in the probe.
The fraud was uncovered in May 2012.
16. In March this year, Adidas group had announced that due to the
irregularities at Reebok India it had restated its financial
statements which "led to a reduction of net income attributable to
shareholders of euro 58 million for 2011. In addition,
shareholders' equity of the opening balance sheet for 2011 is
negatively impacted by euro 153 million".
The Serious Fraud Investigation Office (SFIO) submitted its final
report to the ministry of corporate affairs, which is expected to
take a final decision soon.
The report is said to have found violations by the Indian as well
as overseas management personnel at Reebok.
Meanwhile, Haskell said, fitness brand Reebok India is targeting
40 per cent of total sales from women customers as it plans to
open 100 fit-hub concept stores by April 2014.
"There is a big emphasis on focusing on women consumers. We
are seeing big increase in the percentage of women's business...
we are targeting 40 per cent business from women's stores as we
open 100 fit hub stores by April 2014," he said.
The Reebok fit-hub stores offer fitness and training products
besides advice, guidance and information on community based
fitness events.
Out of the 100 such stores, 50 will be new and the remaining half
will be renovated ones, he said.
By 2015, the company plans to convert all of its 400 plus existing
stores into fit hub stores.
Acknowledgement: A hearty thank to Kapil Thakur sir for giving
us such an interesting topic for research and assignment.