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Caterpillar Inc. Message Board

  • farid_rashad@ymail.com farid_rashad Feb 12, 2013 11:36 AM Flag

    fake revenues, phony invoices, sham factories

    Tales of shady business practices abound in China - fake revenues, phony invoices, sham factories - but until recently, the problem seemed confined mostly to Chinese companies.

    Concern is growing about risks to U.S.-based multinationals in a country where American audit regulators are locked out by the Chinese government and bribery and fraud are routine.
    Questions about transparency and integrity weigh heavily on China, the world's second-largest economy, as it assumes greater economic leadership and responsibility. These doubts test its ability to adhere to international standards.

    Stories of business deception - confirmed by corporate sleuths, former business executives, court filings and experts on accounting in China - are commonplace.

    There was the Chinese company that billed itself as a high-tech television screen manufacturer, but had a factory that turned out to be a man selling fireworks from a shack.

    Or there was the Chinese biodiesel plant that sat idle for months, then sprang to life one day - when investors showed up for a tour - only to fall silent again.

    Last month, there was the scandal at a Chinese unit of Caterpillar Inc (CAT), the world's largest construction equipment manufacturer, based in Peoria, Illinois.

    On January 18, Caterpillar disclosed "deliberate, multi-year, coordinated accounting misconduct" at the Siwei unit of ERA Mining Machinery. Caterpillar said it would write off most of the $654 million it had paid to acquire ERA only months earlier.

    Caterpillar's Siwei stumble was not the first for a U.S. multinational in China, but the scope of the problem stood out.

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