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Adidas is famous for its sports shoes. The company also offers apparel and other
accessories. Adidas has sponsorship deals with popular US football and basketball stars,
as well as the New York Yankees.

Adidas has put in place various measures to ensure high standards of corporate
governance. A system of committees helps the board in discharging its responsibilities.

This case deals with the corporate governance practices at adidas with special reference
to shareholder rights, supervisory board committees, disclosures and compliance with
the German Corporate Governance Code.


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adidas was famous for its athletic shoes - tennis, running, and basketball. adidas also
offered apparel and other jock-type accessories. The #2 maker of sporting goods
worldwide, behind NIKE, adidas had sponsorship deals with popular US football and
basketball stars, as well as the New York Yankees.

Its purchase of Salomon, the French maker of ski and golf gear, steered the company
into the equipment arena. In 2002, adidas reported revenue of $6,837.2 million and a
net income of $239.6 million. In early 2003, adidas was delisted from the Paris
Euronext SA Stock exchange due to low trading volume. The company remained listed
on the Frankfurt Stock Exchange.

Later that year, top sales executive Timothy McCool admitted to cooking the books for
adidas. He reported to auditors that the company owed $2.2 million to footwear retailer
'Just For Feet', when the actual number was less than $50,000.

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adidas had grown out of a rift between German brothers Adi and Rudi Dassler, who
created athletic shoe giants adidas and Puma. As WWI was winding down, Adi
scavenged for tires, rucksacks, and other wastage to create slippers, gymnastics shoes,
and soccer cleats at home.
His sister cut patterns out of canvas. By 1926, the Dasslers had built a factory. At the
1928 Amsterdam Olympics, German athletes fiRst showcased Dassler shoes to the
world. In 1936, American Jesse Owens sprinted to Olympic gold in Dassler's double-
striped shoes...

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In 2001, adidas developed the "adidas-Salomon Corporate Governance

Principles"(ASCGPs). These principles documented the company's commitment to
strengthening the rights of shareholders, to upholding true and fair transparency and
reporting standards as well as making the composition, responsibilities and functioning
of the Executive Board and Supervisory Board (EB&SB) more transparent...


 




adidas's shareholders exercised their rights at the Annual General Meeting (AGM)
according to the "one share ± one vote ± one dividend" principle. They ratified the actions
of the EB&SB as well as the appropriation of retained earnings...




 


The Supervisory Board (SB) consisted of 12 members who were diverse in their
professional background and nationalities. Six members were elected by the shareholders
at the AGM and six members were elected by the employees pursuant to the German Co-
Determination Act (MitBestG)...




 
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In order to increase the efficiency of its work and handle complex issues better, the SB of
adidas had established three committees:
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, which dealt with EB personnel matters...

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The EB consisted of seven members who reflected the diversity and the international
nature of the Group. The EB developed and implemented corporate strategy and
guaranteed appropriate risk management and risk control within the Group...
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An important component of good corporate governance was open dialog and constant
cooperation between the EB&SB. By tradition, EB&SB had maintained a constructive
and efficient working relationship in the best interests of the Group...



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The EB&SB members were required to act in the best interests of the Group and were
not allowed to pursue personal interests in their decisions. Each member of the EB was
required to disclose any potential conflicts of interest to the SB without delay and to
inform the other members of the EB accordingly...

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Members of the adidas Boards were bound to observe secrecy on confidential data
of the Group. EB&SB members were required to follow German law on securities
trading. This meant that they were not allowed to disclose insider information or
utilize it to acquire or dispose off adidas's shares on their own account or on behalf
of any other person...

  
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Members of the EB&SB were required to comply with principles of proper

corporate management. If they culpably violated these principles, they were liable
to adidas for damages...


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adidas believed it was important to encourage an open dialog with the financial
community and ensure fair and equal treatment of its shareholders. To offer more
uniformity and hence more transparency and facilitate comparison with its major
competitors, adidas prepared its consolidated financial statements in accordance with
the International Financial Reporting Standards (IFRS)...

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The GCGC had been implemented in February 2002, to make Germany's corporate
governance rules transparent to both domestic and international investors. adidas
believed it complied with the GCGC recommendations and suggestions with the
following exceptions:

‡ adidas D&O liability insurance did not include a deductible for EB&SB members under
the Corporate Governance Code...

  
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new delhi: state bank of india (sbi) reported an increased 546 fraud cases, involving Rs
269.15 crore in 2000, even as it was able to recover only Rs 2.93 crore during the period
against Rs 6.39 crore in the previous year.
the bank had reported only 492 cases of Rs 30.5 crore in the previous year, official
sources said.
overall, public sector banks (psbs) had reported 1,858 fraud cases involving Rs 538.56
crore with a recovery of Rs 44.83 crore during 2000 as compared to 1,839 cases with Rs
536.63 crore and recovery of Rs 25.82 crore in the previous year, they said.
citing that it was difficult to establish any relation between economic liberalisation and
frauds in psbs, they said psbs in conjunction with government and reserve bank of india
(rbi) had taken a number of steps for prevention of frauds.
the subsidiary banks of sbi had a total of 146 cases with an involvement of Rs 30.57
crore and the state bank of mysore (sbm) topped the list with 34 cases, involving Rs 0.
71 crore and state bank of hyderabad (sbh) with 32 cases involving Rs 15.13 crore during
the period, they said.
sbi subsidiaries had recovered only 11.27 crore, while sbm and sbh recovery was Rs 0.25
crore and Rs 10.13 crore respectively during 2000, they added.
among psbs, other than sbi and its subsidiaries, the karnataka-based canara bank
reported 203 cases of fraud with Rs 53.85 crore, closely followed by bank of india (boi)
with 151 cases with Rs 33.13 crore, syndicate bank with 107 cases involving Rs 8.66 crore
and andhra bank with 102 cases involving Rs 14.36 crore, sources said.
canara bank had recovered Rs 3.21 crore from the fraud cases, while boi's recovery was
Rs 1.36 crore, syndicate bank had recovered Rs 0.97 crore and andhra bank recovered
Rs 13.27 crore in 2000, sources said.
the other notable psb was bank of baroda (bob) with 83 cases, involving Rs 2.35 crore in
2000 as compared to a lower 64 cases with Rs 2.09 crore in the previous year, they said.
interestingly, bank of maharashtra though reported a lower number of cases at three in
2000 as compared to 16 a year ago, its amount involved showed a drastic increase to
6.57 crore in 2000 as against Rs 0.58 crore in the previous year, sources said.
the fraud cases in the corporation bank showed a drastic increase to 37 with Rs 17.5
crore in 2000, while it was only 13 cases with Rs 0.78 crore a year ago, they said.
oriental bank of commerce also showed rise in fraud cases at 22 with an involvement of
Rs 18.66 crore in 2000 as against 10 cases involving Rs 0.45 crore in the previous year,
sources said.
the ailing united commercial bank (uco) had recorded 45 cases with Rs 2.88 crore in the
last year as compared to 47, involving Rs 1.25 crore in the previous year, they said.
the tamil nadu-based indian bank had reported 55 cases of fraud with Rs 3.88 crore
involvement in 2000 as compared to lower 69 cases with Rs 13.26 crore in the previous
year.
although the number of fraud cases in united bank of india increased to 51 in the last
year from 33 in 1999, the amount involved showed a dip to Rs 1.43 crore in 2000 from
Rs 1.82 crore in the previous year, they added.
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MUMBAI: Citibank is probing a Rs 400 crore fraud perpetrated by certain employees of
the bank at its Gurgaon branch in India, atleast three people told ET Now on condition
of anonymity. It is learnt that the fraud was discovered by accident and that the banks
Asia Pacific fraud risk management team has been camping in India for the past two
weeks conducting detailed investigations and questioning several employees who maybe
suspected of being involved in prosecuting the fraud.

People familiar with the development told ET Now that the employees involved have
been suspected of selling investment products to clients claiming that these would
generate unusually high returns. The employees claimed that the products were
authorized by the banks investment product committee and used forged bank
documents and letterheads to prove the same.

The suspected employees then siphoned off the funds raised from the sale of these
products into their personal bank accounts and defrauded clients to the tune of Rs. 400
crore.

The suspected employees had access to High Net Worth Individual (HNI) clients of the
bank and were in roles which involved servicing their requirements for investment
products, according to a bank employee who spoke on condition of anonymity.

It is leant that close to 40 clients have been impacted by the fraud though the number
could be much higher as investigations are still underway.

A citibank spokesperson issued the following statement in response to queries from ET

NOW. "We recently initiated an investigation into a certain set of suspicious
transactions based on documents forged by an employee involving a few accounts in our
Gurgaon branch. We immediately reported the matter to all the relevant regulatory and
law enforcement authorities. Identified suspicious transactions have been isolated and
we are providing full assistance to the authorities in their investigations. This issue does
not impact other accounts, transactions or customers of the Bank. Subsequent to our
complaint naming the involved employee and other external individuals who appear to
be perpetrators in these suspicious transactions,the Gurgaon Police has registered an
FIR.´

The fraud may have been discovered by accident according to some of the people quoted
above. According to one of the sources, a senior official in the consumer banking
division was talking to a client who mentioned that he had recently purchased a product
from the bank that could generate unusually high returns in a short span of time. It was
brought to the clients notice that the bank was not distributing any such product which
is when an investigation into the matter was initiated.

The investigation may have triggered audits across several branches of Citibank in India
according to another bank official.

ET Now first reported the story at 3 PM IST today.

It is learnt that the employee who has been reported to the law enforcement authorities
has been attending office at the Gurgaon branch accompanied by his lawyer everyday
and is threatening the bank with dire consequences if action is taken against him.ET
NOW first reported the story at 3 PM IST today.

It is learnt that the employee who has been reported to the law enforcement authorities
has been attending office at the Gurgaon branch accompanied by his lawyer everyday
and is threatening the bank with dire consequences if action is taken against him.

HIGH-NETWORTH FRAUD

HOW FRAUD WAS COMMITTED?

Citibank¶s relationship managers are said to have committed the fraud with the help of
an external party, most likely a brokerage house that distributes investment products
Funds generated by selling the product to some investment companies and individuals
were transferred to accounts of some brokers, who utilised the money for their
transactions

The employees claimed the products were authorised by Citibank¶s investment product
committee and used forged bank documents and letterheads to prove the same

WHO ARE INVOLVED?

Employee named in FIR learnt to be working as a senior relationship manager in

Citibank¶s Gurgaon branch. The staffer may have been supported by other relationship
manageRs responsible for sales of investment products to high net worth clients of the
bank

WHO ARE AFFECTED?

Close to 40 clients, including some corporate treasuries, could be affected because of the
fraud. It is unclear whether Citibank will compensate its clients for the losses.