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CAT profits hit by Chinese accounting fraud

Mon, 21 Jan 2013 17:20:17 CST
By: AP

Caterpillar, Incorporated says it will have to write off a month and a half of profits after it found accounting fraud in a company it bought recently in China. The Peoria-based equipment maker closed a deal with ERA Mining Machinery and a subsidiary last summer for $653 million. Now, Caterpillar says "deliberate multi-year accounting misconduct" is forcing the company to zero out $580 million on its balance sheets. At least one top Caterpillar executive, a vice president of the mining products division, left the company last week for new opportunities, possibly as a result of the surprise. Some analysts are raising questions about the thoroughness of Caterpillar's due diligence before closing the deal to buy the mining safety equipment maker, which had its origins as a state owned company before it was privatized more than a decade ago . Caterpillar's results have also been affected by an unexpected slump in the mining industry that came as Caterpillar and many of its competitors built capacity and inventory in anticipation of increased sales.

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