Caterpillar fires Siwei senior execs for suspected fraud
Staff Reporter 2013-01-24 15:57
Caterpillar excavators on show at an expo in Guangzhou. (Photo/Xinhua)
Caterpillar, the world's largest manufacturer of construction and mining equipment, has filed suits against several senior executives in its newly bought Chinese subsidiary Zhengzhou Siwei Mechanical & Electrical Equipment Manufacturing for involvement in suspected accounting fraud, the Shanghai-based National Business Daily reports. Siwei makes and sells roof support equipment to mining companies in China.
Caterpillar's media contact in China, Wu Jiahui, told the newspaper that those involved in the scandal have been replaced by a new management team at Siwei. According to information passed by Wu, Caterpillar is conducting an internal investigation. When it acquired Siwei in November 2011, Siwei was an audited listed company, indicating that companies or agencies involved in Siwei's auditing might be responsible, though so far no related agencies have responded to this, the report said.
Over the past few years, ERA Mining Machinery, Siwei's original parent company which operated primarily through its wholly owned subsidiary Siwei, has hired RSM China Certified Public Accountants to audit its annual report. RSM China is the nation's largest domestic accounting agency.
After checks by the newspaper reporter, the daily said it found RSM China used to report quite a few cases that required rectification because of poor execution quality. The reporter called RSM China but was unable to find someone with knowledge of the case, the report said.
Caterpillar said post-analysis revealed Siwei's accounting standards were not up to Caterpillar's global standards. However, as it is still in the process of conducting an investigation, more time is needed before further comment, the report said.
Wu declined to reveal the adjustment details in Siwei's new management team, just saying Siwei's operations are now included in Caterpillar's China business unit.
The company will report its fourth-quarter financial statements and 2013 outlook on Jan. 28, the report said. It plans to include expenditure of about US$580 million resulting from Siwei's improper accounting methods in the report. The company said the Siwei incident will not have a significant impact on Caterpillar's 2013 sales and profits.
Caterpillar said it has not changed its optimistic view on the outlook of China's mining equipment market and that Siwei's strategic position can still be further strengthened, the report said.
Caterpillar has 23 plants, four research and development centers, three logistics and spare parts centers in China, and it is building four more factories. It employs 15,000 workers in the country.
