CAT Uncovers ‘Misconduct,’ Will Take $580MM Q4 Charge
Caterpillar announced that an internal investigation of its recently acquired company, ERA Mining Machinery Limited (ERA), including its wholly owned subsidiary Zhengzhou Siwei Mechanical & Electrical Manufacturing (Siwei), has uncovered deliberate, multi-year, coordinated accounting misconduct concealed at Siwei, located in Zhengzhou, China.
The machinery maker said its investigation determined several Siwei senior managers engaged in deliberate misconduct beginning several years prior to Caterpillar’s acquisition of Siwei. This deliberate misconduct at Siwei will result in a non-cash goodwill impairment charge of approximately $580 million in the fourth quarter of 2012.
Caterpillar said it removed several senior managers at Siwei who were responsible for the misconduct and a new leadership team has been put in place.
“The actions carried out by these individuals are offensive and completely unacceptable. This conduct does not represent, in any way, shape or form, the way Caterpillar does business or how we expect our employees to work, which is spelled out in Caterpillar’s worldwide code of conduct,” said Caterpillar chairman and CEO Doug Oberhelman. “Once our investigation confirmed that misconduct had taken place at Siwei, we moved quickly and decisively to hold the responsible leaders directly accountable for the wrongdoing. Accountability is a critical way that we measure leaders at Caterpillar, and it is my expectation that leaders set an example and are accountable for their actions and results.”
To read Caterpillar’s SEC filing outlining the above click here.