Police have arrested five former senior executives of Reebok India for allegedly defrauding the sportswear company of about $160 million over a number of years, police said on Thursday.
The company's former managing director, chief operating officer and three general managers were arrested on Wednesday on accusations of forging records, stealing goods and creating ghost distributors across India to defraud Reebok.
The accused had "allegedly been systematically cheating the company for over five years. They had set up their own company within Reebok to steal the merchandise", senior police officer B. Singh told AFP.
The scam came to light when Reebok's parent company, the German sports giant Adidas, found discrepancies in the annual accounts and filed a criminal complaint with police in Gurgaon, a booming satellite city outside Delhi.
Adidas estimates the fraud cost the company about 8.7 billion rupees ($160 million).
In March, the company dismissed the managing director Subhinder Singh and chief operating officer Vishnu Bhagat and accused them of falsifying sales records and passing off genuine goods as defective products.
The three general managers who have been arrested allegedly rented four warehouses and used these to store goods and claimed they were supplied to genuine dealers, police said.
The executives have denied the charges.
Earlier this year, Adidas in Germany warned that 2012 earnings were likely to be hit by the discovery of "commercial irregularities" at its Indian Reebok subsidiary.
Adidas announced in May plans to reduce by one-third the number of its 800 Reebok stores in India as part of a restructuring strategy for the brand.
Adidas purchased US competitor Reebok in 2005 for $3.8 billion but only merged the Indian operations of the two brands last year.