Caterpillar Inc writes off most of China deal after fraud
- Tanzanian student was not stripped, paraded naked: K'taka Home Minister
- National Herald case: Sonia, Rahul Gandhi move SC challenging Delhi HC order
- Budget session of Parliament to begin on Feb 23; Jaitley hopeful of GST
- Suspended UP chief engineer Yadav Singh arrested, Congress, BJP say probe links
- Will stand by Pakistan if it acts on terror: Rajnath Singh
Caterpillar Inc uncovered "deliberate, multi-year, coordinated accounting misconduct" at a subsidiary of a Chinese company it acquired last summer, leading it to write off most of the value of the deal and wiping out more than half its expected earnings for the fourth quarter of 2012.
Shares of Caterpillar fell 1.5 percent in afterhours trading following news of the fraud, which was discovered after problems were found with the Chinese company's inventory.
Caterpillar, the world's largest maker of tractors and excavators, said on Friday it would take a non-cash goodwill impairment charge of $580 million, or 87 cents per share, in the quarter.
Analysts had expected the company to report $1.70 per share when it reports its results on Jan. 28, according to Thomson Reuters.
Caterpillar closed the purchase of ERA Mining Machinery Ltd and its subsidiary Siwei last June, paying HK$5.06 billion, or $653.4 million. ERA had been publicly traded in Hong Kong, doing business through Siwei, which is known for making equipment to support roofs in mines.
A member of the Caterpillar board during the course of the Siwei deal told Reuters the board was distracted at the time by a larger transaction and paid relatively little attention to the Siwei acquisition.
"It came as a complete surprise to us," the former board member said of the fraud, speaking on condition of anonymity because of the sensitivity of the situation. "It was presented to us as a pretty straightforward transaction. It's a shame. It should have been investigated further."
The source said the driving force behind the deal was Ed Rapp, the former Caterpillar chief financial officer who now serves as a group president with responsibility for China, among other operations. The source said it was Rapp who presented the deal to the board and pushed for its completion.
- Modi’s Idea of India - 2
- Rohith’s despair speaks of the collective failure of the teaching community
- Mehbooba Mufti has held out CBMs for the BJP-PDP coalition
- What if we cannot poke a little innocent fun at one another
- Outcome on Section 377 will depend on composition of the Constitution bench
- Inadequate staff, payment delays undermine MGNREGA in drought-hit Mahabubnagar