Fraud at new coal subsidiary costs Cat US$ 580 million
By Chris Sleight21 January 2013
Caterpillar has booked a US$ 580 million charge in its fourth quarter results after an internal investigation uncovered accounting fraud at Chinese subsidiary Siwei.
The company said several managers at coal mining equipment manufacturer Zhengzhou Siwei Mechanical & Electrical Manufacturing (Siwei) had falsified accounts for several years in the run-up to its acquisition, following a stock market announcement in November 2011. The actions were described by Caterpillar as, “Deliberate, multi-year, coordinated accounting misconduct.”
It has fired the senior managers responsible and put a new leadership team in place under Qihua Chen, a longstanding Caterpillar employee and vice president responsible for the company’s operations inChina.
“The actions carried out by these individuals are offensive and completely unacceptable. This conduct does not represent, in any way, shape or form, the way Caterpillar does business or how we expect our employees to work, which is spelled out in Caterpillar’s Worldwide Code of Conduct,” said Caterpillar Chairman and CEO Doug Oberhelman.
Steve Wunning, Caterpillar group president with responsibility for Resource Industries added, “Despite these actions we continue to believe that the Siwei acquisition is well aligned with our strategy to expand our role as a leading equipment and solutions provider for the Chinese coal mining industry.”
The company added that it first became aware of the accounting problem in November 2012, when discrepancies were identified between the inventory recorded in Siwei’s accounts and the physical inventory. Caterpillar said it was considering all of its options to recover its losses from those responsible.