A Chinese mining equipment company at the centre of an alleged accounting fraud was also involved in a web of insider loans and asset transfers prior to its purchase by Caterpillar Inc., public filings show. The transactions, while not illegal, should have sounded warnings about the company's finances when the U.S. firm came calling last year, corporate governance experts said.The world's largest maker of tractors and excavators said last week it was writing off most of the $654 million value of its purchase of ERA Mining Machinery Ltd after uncovering "deliberate, multi-year, coordinated accounting misconduct" at its subsidiary Zhengzhou Siwei.Caterpillar said an internal investigation had uncovered improper accounting of inventories, revenue recognition and cost allocation at Siwei, designed to overstate the profitability of the business in the years before it bought it.Corporate disclosures from ERA filed prior to the takeover show some unusual transactions, including directors lending the company cash at relatively high interest rates and asset-shuffling between Siwei and related parties.
Caterpillar Inc. (Caterpillar) is a manufacturer of construction and mining equipment, diesel and natural gas engines, industrial gas turbines and diesel-electric locomotives. Shares of CAT remained unchanged at $96.85. In the past year, the shares have traded as low as $78.25 and as high as $116.95. On average, 6003690 shares of CAT exchange hands on a given day and today's volume is recorded at 600.
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