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Caterpillar Punked By Chinese Fraud, To Write Off Half Of Q4 Earnings
Zerhedge ^ | January 19, 2013 | Tyler Durden

Posted on 01/19/2013 8:22:27 AM PST by Former Proud Canadian

Fraudulent Chinese corporations are nothing new - we have been warning about them since late 2010, spurring the creation of a cottage industry focused exclusively on unmasking such public reverse merger companies (and generating trading profits along the way). One company, however, which apparently was completely unaware of the how pervasive Chinese corporate fraud, is industrial machine titan Caterpillar. This was made clear when, after hours on Friday night of course, the company revealed that it had been misled by "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. In the process it would also take a $580 million, or $0.87 cent charge to earnings, which would wipe out more than half its expected earnings of $1.70 for the fourth quarter of 2012. One wonders, however, is there more to this story than just a case of a gentle, naive board duped by fraudulent, evil, cunning "Chinamen" which may have watched one too many episodes of Autonomy does Hewlett Packard?

(Excerpt) Read more at zerohedge.com ...


TOPICS: Business/Economy; Crime/Corruption; Foreign Affairs; News/Current Events
KEYWORDS: caterpillar; china; chinacorporations; chinafraud; fraud
A well managed, successful American company gets defrauded for half a billion dollars. China is a cesspool of fraud and deceit. A lot of big companies will rue the day they invested in this Asian Potemkin village.

Read the whole article.

1 posted on 01/19/2013 8:22:32 AM PST by Former Proud Canadian
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To: Former Proud Canadian

“China is a cesspool of fraud and deceit.”

Necessary addition ...

“The American Federal Govt. is a cesspool of fraud and deceit.”


2 posted on 01/19/2013 8:26:58 AM PST by George from New England (escaped CT in 2006, now living north of Tampa)
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To: Former Proud Canadian

China’s economy is full of fraud, especially their economic stats


3 posted on 01/19/2013 8:26:59 AM PST by GeronL (http://asspos.blogspot.com)
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To: Former Proud Canadian

Around fourteen years ago...some Asian guy appeared out of thin air...bought up several major Asian sewing machine companies, and then started to find capital interest for buying Singer, along with various French, Italian, and German sewing machine companies. He was creating this massive company to manage all sewing machine empires.

So the day came when he approached a New York bank and wanted in excess of $500 million to conclude a deal for a major Russian sewing machine company. This bank was down to the final moments of the deal, and then some young executive was sent on a plane to Russia to just view the factory before they did the final approval.

He shows up in a taxi at the front gate of this factor that is over 100 years old, and in terrible shape. He spends around thirty minutes (by description of the article I read) with the security guard, and comes away with the idea that this company hasn’t made a profit in their entire history...so that’s not much of a way they are worth $50 million....let alone $500 million. They stopped the deal.

Within months....this entire empire began to fall apart, and almost every country touched by this Asian guy....ended up in bankruptcy court and taking over the old company because of incompetence in financial handling.


4 posted on 01/19/2013 8:30:14 AM PST by pepsionice
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To: Former Proud Canadian

Communism badly hobbles China from becoming what it could be. I do not wish China ill. A free China would be a boon to the world.


5 posted on 01/19/2013 8:42:45 AM PST by HiTech RedNeck (How long before all this "fairness" kills everybody, even the poor it was supposed to help???)
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To: pepsionice

And the Chinese guy? Margaritaville?


6 posted on 01/19/2013 8:43:54 AM PST by null and void (Gun confiscation enables tyranny. Don't enable Tyranny)
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To: George from New England

US governments get away with this largely because of people who do not care, who are satisfied with the superficial.


7 posted on 01/19/2013 8:44:19 AM PST by HiTech RedNeck (How long before all this "fairness" kills everybody, even the poor it was supposed to help???)
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To: Former Proud Canadian
A smart company will "invest" in China knowing exactly what it is getting out of it.

The book value of a company's "investment" in China, as reported on the company's balance sheet, should be listed at $0. The only value this "investment" has is its capacity to produce large quantities of cheap crap by slave labor that can then be sold in the U.S. (and elsewhere) for a monetary return.

This is why Apple outsources the production of their iPhone components to China. The company doesn't even pretend it has a financial stake in the Chinese companies that produce these things. All Apple cares about is that these Chinese "assets" -- with no nominal value at all on Apple's balance sheet -- can produce components that are shipped all over the world and sold to consumers. The only "asset" Apple cares about is the finished product and the price it fetches in the mobile phone market.

8 posted on 01/19/2013 8:46:55 AM PST by Alberta's Child ("I am the master of my fate ... I am the captain of my soul.")
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To: Former Proud Canadian

I don’t feel the least bit sorry for them or any other American company dealing with China.


9 posted on 01/19/2013 8:50:08 AM PST by Revel
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To: pepsionice
My dad was a procurement officer for the Army in 1950s Japan. He was offered some metal castings, made in USA.

They looked pretty rough so several men in the office paid a call on the salesman's office in Tokyo.

It was explained that the castings were made in the Japanese village of Usa.
Usa, it was discovered, had little more than a seaweed drying industry...

10 posted on 01/19/2013 8:57:35 AM PST by Eric in the Ozarks (In the game of life, there are no betting limits)
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To: Former Proud Canadian

Ah, you want material certifications? Yes, we can get material certifications for you. What you want them to say?


11 posted on 01/19/2013 9:06:53 AM PST by Sequoyah101
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To: Former Proud Canadian
If you are selling equipment, never accept a Paypal account. Always cash./s
12 posted on 01/19/2013 9:07:51 AM PST by Little Bill (A)
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To: Eric in the Ozarks

Usa, Japan! I remember that story!


13 posted on 01/19/2013 9:23:01 AM PST by Little Ray (Waiting for the return of the Gods of the Copybook Headings.)
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To: pepsionice
A friend who works as an analyst for a medium sized venture capital company(’medium’ in this league means pretty dam big for most people or companies).
They are tough, competent investors(or short sellers if they think the investment is hyped or overpriced bs, which is one reason while CEOs don't really like such companies. He was sent by his boss to China for a due diligence walkabout on their Chinese holdings or potential investments. Most were ok, one was an empty lot.
Most applicable maxim...If you dine with the devil, best have a long handled spoon.
Should I even ask if the US taxpayers will bail Caterpillar out of this financial poop puddle?
Rather than blame the evil Yellow Peril, I suggest that we concentrate on due diligence by our own companies. Our labor force is fairly comfortable on unemployment, welfare, and a social welfare network that provides for a higher standard of living than working folks in most of the rest of the world, and our Fascist business structure can rely on taxpayer bailouts, complete with cushy bonuses for executives. TWB

14 posted on 01/19/2013 9:24:19 AM PST by TWhiteBear (Sarah Palin...The Flame of the North)
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To: Revel
I don’t feel the least bit sorry for them or any other American company dealing with China.

Agree.
15 posted on 01/19/2013 9:30:46 AM PST by SpaceBar
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To: SpaceBar; Revel

I don’t feel the least bit sorry for them or any other American company dealing with China.


Agree.


I too agree, I’ve said here on this forum and others that dealing with China is a no-brainer. That is you have no-brain at all if you invest your “Real Property” or your “Intellectual Property” there.

But on the other hand if you are having them produce Plastic bags or some such thing then the Low labor rates make sense. Transportation on the other hand...


16 posted on 01/19/2013 9:39:14 AM PST by The Working Man
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To: Former Proud Canadian

Here is another story about China I saw today in Canada Free Press that claims that Obama is negotiating with China to sell off Federal land in exchange for debt forgiveness. Story is at http://www.wnd.com/2013/01/obama-selling-out-america-literally/#VbA8JrXk3vi9QfBS.99


17 posted on 01/19/2013 9:39:32 AM PST by patriotsblood
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To: Eric in the Ozarks

I’d heard of that place before, which for a time allowed sharp Japanese to stamp stuff as “made in USA,” but never knew if it was more than a fictional anecdote.


18 posted on 01/19/2013 9:41:25 AM PST by HiTech RedNeck (How long before all this "fairness" kills everybody, even the poor it was supposed to help???)
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To: patriotsblood

The cheap junk ain’t so cheap after all....


19 posted on 01/19/2013 9:42:57 AM PST by HiTech RedNeck (How long before all this "fairness" kills everybody, even the poor it was supposed to help???)
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To: HiTech RedNeck

It was a kinder, gentler time...


20 posted on 01/19/2013 10:23:31 AM PST by Eric in the Ozarks (In the game of life, there are no betting limits)
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To: Former Proud Canadian

chicom bump for later......


21 posted on 01/19/2013 10:32:40 AM PST by indthkr
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To: Former Proud Canadian

Fraud and corruption in China? Who knew?

“Paging Jackie Chan ... paging Jackie Chan ....”

http://www.freerepublic.com/focus/f-news/2977382/posts


22 posted on 01/19/2013 10:44:58 AM PST by RedWhiteBlue (Mama tried)
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To: Former Proud Canadian
Chinese companies range from efficient, well-run producers of top-quality goods all the way down to the lyingest scam artists on Earth. China produces great stuff, and China produces utter crap.

Everything you have heard about China - good and bad - is true. China is so huge that both realities exist simultaneously.

Joint ventures with Chinse firms obviously involve much more risk than merely buying finished products, and therefore require much more due diligence. Many American companies have built successful new venture in partnership with Chinese firms. But it sounds like Caterpillar - like HP - got a little lazy with the research in their zeal to make some easy money.

23 posted on 01/19/2013 10:53:47 AM PST by Mr. Jeeves (CTRL-GALT-DELETE)
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To: Mr. Jeeves
But it sounds like Caterpillar - like HP - got a little lazy with the research in their zeal to make some easy money.

Several somebodys in the Legal Dept. are in deep doo methinks.

24 posted on 01/19/2013 1:46:39 PM PST by houeto (https://secure.freerepublic.com/donate/)
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To: Former Proud Canadian

I am sure the Free Trade Communists who routinely shill and support Free Trade with Communist China...will have some spin on this

StupidNomics rears its head again...getting burned by the Communist Chinese

The Commie Chinese know they can roll any American concern because of Free Trade stupidity. This nonsense will end once the US starts slapping tariffs on the Commie Chinese


25 posted on 01/19/2013 2:31:45 PM PST by SeminoleCounty (The only automatic weapon is the one Obama uses to take your paycheck)
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To: Former Proud Canadian
I agree. Some of us have been watching this develop for years. The worst is yet to come.
26 posted on 01/20/2013 10:21:59 AM PST by hinckley buzzard
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