Amway India Chairman and Chief Executive William S Pinckney has been arrested by Andhra Pradesh Police in connection with a criminal case registered against the direct-selling company.
He was today produced before a Kurnool district court which sent him in 14-day judicial custody.
Kurnool Superintendent of Police Raghurami Reddy said that Pinckney was arrested in Gurgaon yesterday and was brought to Kurnool on a warrant. The action against him was taken on the basis of a complaint filed here alleging financial irregularities in Amway's operations.
"The CEO has been booked under the Prize Chits and Money Circulation Schemes (Banning) Act, besides charges of cheating as well as extortion under relevant sections of the Indian Penal Code (IPC)," Reddy said.
The company termed the allegations against the CEO as "frivolous" and said his arrest was "unwarranted".
This is the second time that the Amway India CEO has been taken into custody. Kerala police had arrested Pinckney as well as two Amway directors last year for alleged financial irregularities.
Pinckney was produced in a court in Dhone town, about 50 kms from here, which sent him to jail for two weeks.
A bail petition was moved in the court, which was rejected and the case has been posted for arguments tomorrow.
Pinckney has been shifted to a prison in Kadapa district, another police official said.
Reacting to the development, Amway, in a statement, said that it was "aggrieved and shocked", since the arrest was "unwarranted" and the case in which action has been taken was filed in December 2013.
"The company had no prior information on the same. Allegations mentioned in the FIR are frivolous and give a misleading impression about our business," the statement said.
Amway claimed that as "a law abiding" corporate, it has always cooperated in such investigations, and has responded to the queries and documentation.
So far, Amway has furnished all information and documents sought by the police officials, the company further said.
Indian Direct Selling Association (IDSA), in a statement, condemned the arrest of Amway CEO.
"This incident highlights the urgent need for the Government of India to amend the Prize Chits and Money Circulation Schemes (Banning) Act 1978 (PCMCS). Unless amended, the Act will be unable to distinguish genuine direct selling companies from pyramid schemes and regular consumer complaints will continue to attract provisions of the PCMCS Act," IDSA said.
The association also demanded for an immediate operational and 'definitional' clarity to provide a framework to genuine direct selling companies for effective and unhindered operations.
Meanwhile, Kurnool police have filed a petition seeking 10-day custody of Pinckney for further questioning. The petition will come up for hearing tomorrow.
The AP police, in a statement, said in 2006, the CID Police of the state, on a complaint, had registered a criminal case against Amway which in turn approached High Court of AP requesting to declare that its scheme does not fall under the provisions of "The Prize Chits and Money Circulation Schemes (Banning) Act, 1978".
However, a division bench of the High Court held that the scheme of Amway is illegal Money Circulation Scheme and falls within the "mischief of definition of Money Circulation Scheme".
Subsequently, the Supreme Court had also dismissed the Special Leave Petition filed by the Amway, the AP police statement said.
Reddy said the police had registered an FIR based on complaint lodged by an advocate, Jagannath Reddy, in December 2013.