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Caterpillar Punked By Chinese Fraud, To Write Off Half Of Q4 Earnings

Tyler Durden's picture


Fraudulent Chinese corporations are nothing new - we have been warning about them since late 2010, spurring the creation of a cottage industry focused exclusively on unmasking such public reverse merger companies (and generating trading profits along the way). One company, however, which apparently was completely unaware of the now pervasive and proven for the past two years Chinese corporate fraud, is US industrial titan Caterpillar. This was made clear when, after hours on Friday night naturally, the company revealed that it had been misled by "deliberate, multi-year, coordinated accounting misconduct" at a subsidiary of a Chinese company it acquired last summer, leading it to write off most of the value of the deal. In the process it would also take a $580 million, or $0.87 cent charge to earnings, which would wipe out more than half its expected earnings of $1.70 for the fourth quarter of 2012. One wonders, however, is there more to this story than just a case of a gentle, naive board duped by fraudulent, evil, cunning "Chinamen" which may have watched one too many episodes of Autonomy does Hewlett Packard?

Reuters has more details on the Fraud:

Caterpillar closed the purchase of ERA Mining Machinery Ltd and its subsidiary Siwei, China's fourth-largest maker of hydraulic roof supports, last June, paying HK$5.06 billion, or $653.4 million. ERA had been publicly traded in Hong Kong, doing business through Siwei, which is known for making equipment to support roofs in mines.


A member of the Caterpillar board during the course of the Siwei deal told Reuters the board was distracted at the time by a larger transaction and paid relatively little attention to the Siwei acquisition.


"It came as a complete surprise to us," the former board member said of the fraud, speaking on condition of anonymity because of the sensitivity of the situation. "It was presented to us as a pretty straightforward transaction. It's a shame. It should have been investigated further."


The source said the driving force behind the deal was Ed Rapp, the former Caterpillar chief financial officer who now serves as a group president with responsibility for China, among other operations. The source said it was Rapp who presented the deal to the board and pushed for its completion.


A Caterpillar spokesman declined to comment on Rapp's role in the deal. Rapp could not be immediately located for comment.


In a statement, Caterpillar said an ongoing investigation launched after the deal closed "determined several Siwei senior managers engaged in deliberate misconduct beginning several years prior to Caterpillar's acquisition of Siwei."


According to a question-and-answer dialog Caterpillar included in its statement, the company found discrepancies in November between the inventory in Siwei's books and its actual physical inventory, triggering the probe.


The company also said it had replaced several senior managers at Siwei, adding that their conduct was "offensive and completely unacceptable."

So the board was "distracted"? Perhaps, the board was perfectly "tracted" and instead what the board did was pay close attention to what Hewlett-Packard did with Autonomy, where the allegations of fraud are still an open-ended case of he said, she said, and immediately saw an opportunity to use a tiny bolt on acquisition in a country which is the source of its entire marginal growth, as a scapegoat on which to pin everything that was going wrong in China, and maybe the world.

Recall from the Q2 CAT earnings release warning profusely about what is going on in China:

In China, we are lowering production levels and have started to export machines to other regions of the world.  However, the construction industry in China is still weak and our dealers are reducing their inventories of new machines, further reducing our shipments.  While our inventory of new machines in China increased, the combination of our finished inventory and dealer machine inventory was about flat with the end of the first quarter of 2012.  We are working to lower finished inventory, but given the weak construction equipment industry in China it will be a gradual reduction throughout 2012.  We are being appropriately cautious—we intend to lower inventory, but are considering our supply chain and are acting in an orderly manner.  In addition, we are trying to balance our actions—the industry in China has been weak over the past year, but can move quickly when it turns around.


As we began 2012, our expectations for sales in China were higher, and we built substantial new machine inventory in the first quarter to support what is usually a seasonally strong quarter.  First-quarter sales were lower than expected, and we ended the first quarter with higher inventory in China.  We developed and are executing a plan for an orderly reduction of China inventory that includes lower production, merchandising programs to improve sales and the export of machines from China to other parts of the world.


We remain very positive on long-term industry growth in China and our strategy to grow our business there.  Our plans for the remainder of 2012 reflect an orderly ramp down of production that considers our entire supply chain in China.  Given the current low rate of sales and the production ramp down, it will likely take the rest of 2012 to reduce inventory to appropriate levels.

Subsequently, in Q3 CAT did all it could to telegraph that things in China may finally be improving, so no need to change anything about how business is conducted there:

From an economic standpoint, we are expecting slightly better world growth in 2013 with modest improvement in the United States, China and most of the developing world, but continuing difficulty in Europe.


"We are taking a pragmatic view of 2013—we're not expecting rapid growth, and we're not predicting a global recession.  At this point, we expect 2013 sales will be similar overall to 2012, but with a slightly weaker first half and a slightly better second half.  While machine deliveries to end users have continued to hold up, our sales will probably remain relatively weak early in 2013 as dealers are likely to continue reducing inventories.  When expected dealer inventory reductions level off, and easing actions by central banks and governments around the world begin to improve economic growth, we expect our business will begin to improve.  While there's reason for optimism, and we're not expecting a global recession in 2013, we are prepared and stand ready to take action no matter what happens to the global economy," Oberhelman added.

Betting one's business model on the "easing actions by central bankers" - brilliant. But let's leave that for another day (yet one does wonder: was one of the "actions" the board was "prepared to take" in case of global recession, the release of news of massive fraud at a small Chinese subsidiary, thereby being excused for missing earnings by half?)

Reuters said as much:

The Siwei deal came as part of Caterpillar's larger ambitions in China. In early 2012, it added Jon Huntsman, the former U.S. ambassador to China, to its board of directors.


The company, which already has 23 manufacturing facilities in China and four more under construction, said the Siwei episode would not change its strategy in the country.

Of course it won't change the strategy: in fact, CAT will welcome the acquisition of futher such EPS-charge off enabling microcaps. After all, all it takes for the company to pull a get out of jail card by missing EPS by half in any given quarter, is for it to blame lax accounting and someone else's fraud for the problem.

Because who is to say what is really going on? Naturally, nobody will trust the Chinese side of the story now. As for CAT: well, let's say operating earnings were so horrible that not even all the GAAP accounting magic in the world could make the company beat earnings estimates. So what does the company do? It takes a "charge" which allows it to mask a whopping one-eighth of its entire full year EPS miss courtesy of a perfectly convenient scapegoat. As for what is really going on behind the scenes - it could be due to Chinese business imploding, or global economic conditions getting so bad the firm just can't find a way to offset the losses, or anything else. Alas, we will never know as the official spian has been released.

But in the meantime, business in China continues as usual of course, now that CAT has reset losses with enough of a buffer to last it one more quarter. And if Chinese growth, and by growth we mean the construction of empty cities and hollow malls, does not pick up, well then - some other "manager" will be thrown under the bus for pushing a "distracted" board to purchase yet another Chinese microcap, whose books everyone is shocked, shocked, to learn were cooked end to end.

We look forward to even more high flying companies whose stock price has been pulled artificially higher due to the relentless ramp in ES by prop desk of primary dealers, to come up with comparable excuses for why earnings will miss. Because if it is not some softward glitch's fault, it is some manager, or some auditor, or some accountant, or some M&A advisor, or some regulator.

Whose fault it never, ever is, is the ever declining global cash flow in a world in which the stock market and the economy have now hopelessly and laughably disconnected.


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Sat, 01/19/2013 - 11:21 | 3168702 ziggy59
ziggy59's picture

Notice how over the past 10 years there is always a bogeyman and scapegoat for horrible earnings, and its not because the economy sux?

Sat, 01/19/2013 - 11:30 | 3168707 GetZeeGold
GetZeeGold's picture



You mean like the campaign on gun control? Get the weapons before the masses realize they're screwed.


I would point out we did sorta dishonor their investment first.....right after we told them we wouldn't.

Sat, 01/19/2013 - 11:43 | 3168745 francis_sawyer
francis_sawyer's picture

Well at least they didn't blame it on hurricane Sandy...

Sat, 01/19/2013 - 11:45 | 3168750 GetZeeGold
GetZeeGold's picture



.....or Bush.

Sat, 01/19/2013 - 11:55 | 3168766 francis_sawyer
francis_sawyer's picture

Standard Curriculum of 'graduate' level of business school...


- How to cleverly affix BLAME 504

- Insider Stock Option Trading 101 ~ (the rest is 'on the job' training)

- Golden Parachute jumping 301

- Techniques & Strategies of political bribes

- How to be a douchebag without really trying (a 'pass-fail' course)



Sat, 01/19/2013 - 12:16 | 3168790 Zer0head
Zer0head's picture



A Caterpillar spokesman declined to comment on Rapp's role in the deal. Rapp could not be immediately located for comment.


Rumor has it he has been spotted here

In other news

Algeria launches 'final assault'; all  hostages dead

(so was the strategy to end the crisis before the US media was forced to start reporting on it?)

Sat, 01/19/2013 - 12:37 | 3168822 Stackers
Stackers's picture

The Chinese have no word for business ethics. Gave up on doing any business with those people in '95.

Sat, 01/19/2013 - 13:52 | 3169021 secret_sam
secret_sam's picture

That's silly.  You make it sound like it's the Chinese running Goldman-Sachs or the Fed.

Sat, 01/19/2013 - 14:01 | 3169044 Stackers
Stackers's picture

At least GS and the Fed pretend to use lube when they give you a good ramming. Chinese dont even bother with that.

Sat, 01/19/2013 - 14:19 | 3169090 unrulian
unrulian's picture

it's ok.... they have small penises..

..and chinese penises are pretty small too

Sat, 01/19/2013 - 20:41 | 3169788 AldousHuxley
AldousHuxley's picture

Chinese communists ripoff Jewish bankers






Sat, 01/19/2013 - 11:44 | 3168746 ihedgemyhedges
ihedgemyhedges's picture

Not only was the release issued after hours on a Friday, IT IS A 3 DAY WEEKEND WITH AN INAUGURATION AND A SCALING UP IN ALGERIA!!!

When the market is running on ether and algos, you always release info like this on a weekend like this..........

Sat, 01/19/2013 - 11:50 | 3168762 Caviar Emptor
Caviar Emptor's picture

Earnings matter? 

Sat, 01/19/2013 - 12:41 | 3168835 walküre
walküre's picture

The much BIGGER picture is that China as a whole is one epic fraud. Why give any credence to any reporting coming from an alleged communist shithole where corruption is naturally rampant. Much more predominent even than in the US and that says ALOT. The Chinese fraudsters have stolen decades worth of IP from the West and converted their toiletpaper currency into real assets such as foreign real estate and foreign companies. Of course they had help from our own fraudsters on Wall Street and in DC.

Now the snake is eating its tail and the whole enchilada will collapse into nothingness. Everyone who built their house on paper is getting nothing. What does controlled demolition of a house of cards look like?

Sat, 01/19/2013 - 15:35 | 3169239 Never One Roach
Never One Roach's picture

at least 'The Aliens' are using all that money to buy houses in California and Vancouver, propping up the Bubbles there...ya gotta look at the bright side.

Sat, 01/19/2013 - 18:26 | 3169582 Koffieshop
Koffieshop's picture

"The Chinese fraudsters have stolen decades worth of IP from the West and converted their toiletpaper currency into real assets such as foreign real estate and foreign companies."

IP only exits if you pretend it does and same goes for fiat currencies. Those who understand this have an edge.

Sat, 01/19/2013 - 21:02 | 3169810 sun tzu
sun tzu's picture

We sold them $1 trillion worth of toilet paper and the British slapped them around for 100 years. It's called payback. Besides, it's not like all these corporations didn't know that the Chicoms couldn't be trusted. If I jump in a snakepit and get bitten, do you blame the snakes or me?

Sat, 01/19/2013 - 23:33 | 3170058 cynicalskeptic
cynicalskeptic's picture

The Chinese have VERY LONG memories - even if the West does not.  You're forgetting the Opium Wars when Britain shoved Opium onto the Chinese population as a way to offset the drain of silver that Chinese imports of tea, silk and porcelain were costing Britain.   The US was complicit in this. 

China views the 17 and 1800's as an abberation where the western 'barbarians' managede to gain short term advantage, they were none too hppy with Japan raping and pillaging during the 30's with not a squaek from the west.   BTW - China is still wondering what happened to all the gold and silver looted by the Japanese - you don't really thinnk the U S never found ANY of that, do you?

China has lots of reasons to be PO'd at the west.   They view anythign they may do as 'payback.'

Sun, 01/20/2013 - 12:59 | 3170618 post turtle saver
post turtle saver's picture

The Chinese need to learn that living well is its own revenge.

Sat, 01/19/2013 - 11:42 | 3168742 Water Is Wet
Water Is Wet's picture

They are also always "one-time items," so when you back those out earnings are always and everywhere growing.  Never mind that a company loses a couple years worth of earnings in one write-off, that is only the GAAP accounting; the fake numbers look much better.

Sat, 01/19/2013 - 12:03 | 3168780 SafelyGraze
SafelyGraze's picture

in "internal investigation" will suffice to clear this up

beginning with stricter reporting standards and clearer policy statements for the sales representatives, technicians, manufacturers, janitors, and communications staff.

these employees far outnumber the BOD and executives. so, statistically speaking, the probability is negiligible that any fault stems from the minuscule fraction of individuals in the top positions.

Sat, 01/19/2013 - 12:13 | 3168793 nmewn
nmewn's picture


Working for a corporation I can tell you, this is exactly how it will go. More policies and procedures will have to be implemented this year, so as to address the failed policies and procedures of last year.

You know, instead of shit canning any execs who signed off on it. 

The parallels to governance are striking ;-)

Sat, 01/19/2013 - 12:39 | 3168828 SafelyGraze
SafelyGraze's picture




plus, follow links and play the videos

road to roota says: this story was released as a trial balloon. if poeple can forgive lance armstrong and friendsOfTeo, then the media will at long last "investigate" and "report on" individuals who pulled pranks like tarp and libor and comex and mbs and swaps and leasing and rehypothecation and ss and foreign adventures and fracking and gmo and civil forfeiture and public education.

debt forgiveness begins with public forgiveness of the players who took everything.

let's hug. 

Sat, 01/19/2013 - 12:48 | 3168855 nmewn
nmewn's picture

Speaking for myself, I'm not much on forgiving liars, thieves and scoundrels...especially those who repent to Oprah or Facebook or are allowed to stay in positions of authority by simple bribery and demagoguery. 

But I suspect I'm not the only one ;-)

Sat, 01/19/2013 - 13:02 | 3168867 SafelyGraze
SafelyGraze's picture

check. wasn't meant as a direct response to your post. more as instructions to self. note to self: read, re-read, re-re-read about fraud "exposed" in sports.

the posting was meant as a way to place the seemingly-naive "road to roota" perspective (  there are benign entities in charge ) in contraposition with the more cynical perspective (all persons in power are, per force, liars and cheats and evil)

kind of a thought-experiment.

wrapping head around the notion that a single individual playing a sport is such a huge deal that reporters couldn't bring themselves to think it's even possible that they could have believed a prank/hoax/fraud.

Sat, 01/19/2013 - 13:19 | 3168921 nmewn
nmewn's picture

Well yeah, I've kinda had that perspective for years.

Not ALL execs are thieves, liars & scoundrels just as ALL politicians are not. You have to account for the just plain ignorant ones as well the normal ones who genuinely try to the best of their abilities.

Thats why (I believe) the system under which they operate (corporate or governance) must be completely dispassionate.

One can't just say because Senator Blowhard "built" a bunch of roads, bridges and schools or CEO McMoneyBags kept the company profitable and employed thousands over the years...BEFORE THEY TOOK THE BRIBE...that all of the preceding negates the punishment for taking the bribe.

Most of us live in a one strike and you're out world...they should be forced to live in the same world, especially given their presumed stature in it. There needs to be real consequences for wrong doing, including the social stigma that they have to work through themselves in order to be accepted back on a par...with us.

In short, its not enough to say I'm sorry baby, please forgive me, like Jake Blues in the tunnel staring down the muzzle ;-)

Sat, 01/19/2013 - 12:51 | 3168863 Never One Roach
Never One Roach's picture

inspirational...if not heartfelt....


"the devil made me do it....but now I'm all better...."

Sat, 01/19/2013 - 14:37 | 3169132 old naughty
old naughty's picture


We certify the accuracy, under SOX:

Q2 issued warning,

Q3 tried to improve,

Q4 writen off half of quarter earnings.

And we issues new guide:

Early 2013, sales remain weak…


And advisors and auditors concurred with the board.

No problem, everything is fine.


What was the question, again, investor?

Sat, 01/19/2013 - 18:08 | 3169554 WillyGroper
WillyGroper's picture

>>>let's hug.

Yes, let's do. With a nice little vetinary hypodermic needle. 

Sat, 01/19/2013 - 19:07 | 3169653 TeMpTeK
TeMpTeK's picture



Sat, 01/19/2013 - 11:24 | 3168708 ghengis86
ghengis86's picture

Yerrow Caterpirrar better than Red Caterpirrar?

Sat, 01/19/2013 - 11:30 | 3168719 Everyman
Everyman's picture

What about Purpa Caterpirrar?

Sat, 01/19/2013 - 12:18 | 3168787 WarPony
WarPony's picture


Sat, 01/19/2013 - 11:27 | 3168710 Seasmoke
Seasmoke's picture

Who let the CAT out of the bag ?

Sat, 01/19/2013 - 11:30 | 3168718 NotApplicable
NotApplicable's picture


Sat, 01/19/2013 - 11:41 | 3168740 flacon
Sat, 01/19/2013 - 11:31 | 3168711 Everyman
Everyman's picture

Now wait just a damn minute here, you mean that BOD and the CEO and CFO and COO all were duped and did not know what was going on in the industry and more specifically, a contractual agreement in China???? Isn't that why they are in those chairs and positions, to in fact "know"???

WELCOME to the current state of affairs in the American Corporate Board Rooms.  WE have BODs and Board rooms FULL of total bout and paid incompetents, and these pricks across the board get awesome compensation, bonuses and the like, for this level of stupidity??? What the hell are they doing the at the controls of a major corporation???  Just shows how far from the tree the apple has fallen.  The "Captains of Industry" of yesteryear are all laughing at these mental lightweight corrupt incompetent boobs in the Board rooms.  And yeah, this is usually where we get GOP congressmen, the Dems get them from "Community organizers"!

And we wonder why we have a leadership crises, bubble, or whatever you want to call it.

These people SUCK and should be FIRED and SHOT, just for being completely stupid and being completely unaware of just HOW stupid they really are.

Sat, 01/19/2013 - 11:31 | 3168724 Flakmeister
Flakmeister's picture

Corporate feudalism in a nutshell...

Why worry about any downside when you capture 90% of the upside and have nothing to fear from any downside. It is not just for banks anymore...

The modern day "Droit de Seigneur"....

Sat, 01/19/2013 - 11:54 | 3168749 Dr. Engali
Dr. Engali's picture

I don't agree with everything you say, but I have no clue why you're getting junked for that comment. Either they are CAT employees or you have a couple serial Junkers. My guess is the latter. .

Sat, 01/19/2013 - 11:54 | 3168767 nmewn
nmewn's picture

Same here, we rarely agree on anything...but I greened him below for saying essentially the same thing I did further down.

Due diligence is part of the fiduciary duties of executives when they beg and grovel for (and get) someone elses money.

Sat, 01/19/2013 - 11:58 | 3168772 Caviar Emptor
Caviar Emptor's picture

Due diligence is for dildos...overheard in the corporate washroom of a Fortune 500

Sat, 01/19/2013 - 12:01 | 3168776 nmewn
nmewn's picture

Probably applies to vibrators as well ;-)

(As long as they're not the lithium-powered-fire-starter

Sat, 01/19/2013 - 12:08 | 3168785 a growing concern
a growing concern's picture

Just don't take it in the shower.

Sat, 01/19/2013 - 12:29 | 3168808 nmewn
nmewn's picture

Wrap that rascal!

Sat, 01/19/2013 - 13:29 | 3168951 hardcleareye
hardcleareye's picture

If your going to get funky cover that monkey....

Sat, 01/19/2013 - 14:24 | 3169103 unrulian
unrulian's picture

you must have good ears... the shredders in the next room are really loud

Sat, 01/19/2013 - 11:52 | 3168764 Caviar Emptor
Caviar Emptor's picture

Yes. And anyway earnings don't matter when you can borrow Infinity at 0% to pay off your last goof. 

Margins don't matter, revenue don't matter and EBIDTA don't matter when you can just run a pyramid scheme, a check kiting business and a Ponzi club. 

Sat, 01/19/2013 - 11:41 | 3168733 Rainman
Rainman's picture

We are pleased to announce that the lower level culprit at CAT HQ has been immediately identified and purged...carry on.

Sat, 01/19/2013 - 12:35 | 3168820 PhD
PhD's picture

Unless of course that this has nothing to do with incompetence and stupidity, but rather represents a new form of bribery used to access the Chinese market.
It would be very interesting to see from whom it was that Caterpillar purchased ERA Mining Machinery Ltd.

Sat, 01/19/2013 - 12:52 | 3168869 Flakmeister
Flakmeister's picture

Oh goodie.... Klepto-corporate feudalism....

Where do I sign up for my two minutes hate?

Sat, 01/19/2013 - 13:58 | 3169029 NoDebt
NoDebt's picture

"A member of the Caterpillar board during the course of the Siwei deal told Reuters the board was distracted at the time by a larger transaction and paid relatively little attention to the Siwei acquisition."

Then why the fuck did you do it??  If it was that unimportant then why didn't you just put it on hold until you finished the first deal??  You obviously can't juggle more than one ball at a time, so why did you try for two with shareholder money?

Here's how this conversation should go:  "What happened?"  "We were busy with other stuff so we didn't pay much attention to this one."  "So you moved forward anyway, without even doing full due dilligence?"  "Yeah, basically.  We were feeling lucky that day."  "You're fired."

They just flushed half a billion dollars down the drain and they couldn't come up with a better excuse than this?  Really?  I mean it's not like these Chinese companies weren't already WELL known for cooking the books at the time they did the deal.  Red flags should have been up all over this.

To Cat's Board:  Your excuse is as inexcusable as your actions.  At least have the intelligence to blame the auditor like HP did on Autonomy.

Sat, 01/19/2013 - 22:25 | 3169307 TruthBeforeAll
TruthBeforeAll's picture

You mean the Chinese aren't intimidated by all of CAT's Six Sigma Black Belts?

Sat, 01/19/2013 - 17:02 | 3169433 RafterManFMJ
RafterManFMJ's picture

Sadly the hourly employees will have to absorb lower pay and reduced profit sharing.  It's just a shame but that's how these things work out. Shit rolls down hill, my friends.  You don't like it? You shoulda been a CEO.

Sun, 01/20/2013 - 15:07 | 3170873 carbonduke
carbonduke's picture

Everyman, do not underestimat those bastards. They are not stupid, far from it- They are corrupt, they do know what is going on, and what to expect. But when there is money involved human nature comes first. And fuck the shareholders. 

Sat, 01/19/2013 - 11:29 | 3168712 Flakmeister
Flakmeister's picture

Due diligence is for weenies....

Sat, 01/19/2013 - 13:29 | 3168950 gould's fisker
gould's fisker's picture

According to the Reuters version of this story CAT did do due diligence--after all, these types of deals are supposed to be vetted and closed "legally":

"Citigroup and law firm Freshfields Bruckhaus Deringer LLP served as financial and legal advisers to Caterpillar on the transaction. Blackstone and DLA Piper acted as ERA's financial and legal advisers."

Sat, 01/19/2013 - 19:13 | 3169039 Flakmeister
Flakmeister's picture

Do you think the "best and brightest" end up in the Corporate Governance, Risk Management, Oversight etc... groups at Fortune 500 cos.? Hey those MBA's that got C's in B-school get a few crumbs too...  All in the name of fostering Plausible Deniability in the Board Room...

Sat, 01/19/2013 - 11:29 | 3168713 freedogger
freedogger's picture

Just have to say, love the headlines that Tyler comes up with. "Caterpillar Punked..." That's exactly what happened.

Sat, 01/19/2013 - 11:30 | 3168714 docmac324
docmac324's picture

Just another excuse to go to war, with someone else.  We at CAT were stupid, so you need to die.

Sat, 01/19/2013 - 11:30 | 3168722 GetZeeGold
GetZeeGold's picture



No wonder the DHS needs so many the math seems to work.

Sat, 01/19/2013 - 11:36 | 3168732 rehypothecator
rehypothecator's picture

Except for the minor detail that the Department of Homeland Security indicates by its name the people it intends to use the bullets for.  

Sat, 01/19/2013 - 11:29 | 3168716 El Gordo
El Gordo's picture

Wow, and this is one of our large,well managed companies.  Imagine how the poorly managed ones must be fairing.  Oh, BTW, Jon Huntsman - Bwaaaaaaaahhhh.  Who will they add next, master mechanical engineer Algore?

Sat, 01/19/2013 - 12:47 | 3168852 jumbo maverick
jumbo maverick's picture


Sat, 01/19/2013 - 11:30 | 3168717 russwinter
russwinter's picture

The U.S. economy is a neofeudal debt-serf wasteland with few opportunities for organic (non-Central Planning) expansion. The trend described in this article, "America's New Housing Landlords" of buying up  ousing at 4.5% cap rates and trying to rent to poor people is about as good "an opportunity" as it gets.

Sat, 01/19/2013 - 11:31 | 3168720 Papasmurf
Papasmurf's picture

sino tractors

Sat, 01/19/2013 - 11:30 | 3168721 nmewn
nmewn's picture

"It's a shame. It should have been investigated further."


Sat, 01/19/2013 - 12:13 | 3168792 Taffy Lewis
Taffy Lewis's picture

China, the country that not long ago when CxOs went to visit, they were advised to get new cell phones upon entering the country, then throw them in the trash upon exiting. That China?

What happened at CAT is because there is no risk in the market any longer. There is no fear of losing something.

Sat, 01/19/2013 - 12:27 | 3168806 nmewn
nmewn's picture

I have friend who's son is in China, I can assure you, they are as corrupt or more than anything we have here.

It took him all of about about two weeks to setup a "work around" to communicate back home with his parents without the Chi-Coms looking/listening in. This can't be done without corruption getting almost all the way to the top.

But to your point...profit is a great motivator, for good or ill. For those who thought that only being "honest smart" in a corrupt casino was the only thing that mattered, this should be their wake up call.

Sun, 01/20/2013 - 01:02 | 3170161 thefedisscam
thefedisscam's picture

You and your friend's son are the Bigger CROOKS than ANY of the Chinese!!

Sun, 01/20/2013 - 09:19 | 3170417 nmewn
nmewn's picture

It is customary when leveling a charge to present some form of evidence, without it, there is nothing to back your accusation but hot air and bad sentence structure.

Sat, 01/19/2013 - 11:33 | 3168728 tnquake
tnquake's picture

"and easing actions by central banks and governments around the world begin to improve economic growth,"

Ctl -P to infinity and beyond!

Last one without a chair when the music stops, are they the winner or looser?

Sat, 01/19/2013 - 11:59 | 3168774 knowless
knowless's picture

pretty insane that a global excavation equipment manufacturing firm would be at all concerned with something like that. I mean, that's like a necessary service, like, you can't have modern civilization without it.. why in the fuck should they be at all worried about something so unrelated to their industry?

credit? consumer confidence? such insane bullshit.

Sat, 01/19/2013 - 11:34 | 3168729 Luckhasit
Luckhasit's picture

Hm, how lives does a CAT have anyway?

Sat, 01/19/2013 - 11:40 | 3168736 Dr. Engali
Dr. Engali's picture

I thought these companies were run by the smartest people on the planet. It's more like the best crooks on the planet.

Sat, 01/19/2013 - 12:30 | 3168812 dwdollar
dwdollar's picture

And their large compensations are due to their "superior" intellects... Yet time and time again their supposedly duped by Chinamen.

Sat, 01/19/2013 - 11:41 | 3168741 Lokking4AnEdge
Lokking4AnEdge's picture

The fraud in China is nothing compared to the fraud in India.......

Sat, 01/19/2013 - 12:30 | 3168811 gmrpeabody
gmrpeabody's picture

The fraud in America ain't too shabby, either.

Sun, 01/20/2013 - 01:04 | 3170166 thefedisscam
thefedisscam's picture

The fraud in BOTH China and India is NOTHING comparing to the fraud in the U.S. Wall Street!

Sat, 01/19/2013 - 11:44 | 3168748 rodocostarica
rodocostarica's picture

Looks like Rapp is going to have to take the Rap.

Sat, 01/19/2013 - 12:01 | 3168777 Agstacker
Agstacker's picture

Baa daa chhh..

Sat, 01/19/2013 - 13:08 | 3168903 booboo
booboo's picture

Outside of the banking industry there is still a cost associated with really fucking up in the private sector, in the public sector you get promoted.

I don't consider banking a private enterprise anymore, just a symbiotic relationship with government holding a monopoly on credit creation. The rest of private copr. play along to get along since they know that government make laws that create conflict for the specific purpose of having the monopoly on resolving the conflict.

Sat, 01/19/2013 - 11:47 | 3168753 bulldung
bulldung's picture

What is truth,what is value?Simple questions with hard answers.that's why they get the big bucks.Heads should roll.

Sat, 01/19/2013 - 11:47 | 3168755 JackT
JackT's picture

Are you sure this isn't considered "Catfishing"?  Damn catfish are tricking everyone these days. 

Sat, 01/19/2013 - 11:47 | 3168756 Cdad
Cdad's picture

Yep...the old "one time" charge...which are, as Tyler has been pointing out for months, anything but "one time."  This phenomena is just one of many frauds perpetrated by corporations to condition the perception of business, and thereby disguising the condition of the actual economy.  After all, executives and board members still have lots of shares they need to unload.

The ethical rot does not just end in DC or on Wall fills the board rooms of major corporations all over the U.S.  Moral relativism is a bitch.   


Sat, 01/19/2013 - 11:48 | 3168759 MrSteve
MrSteve's picture

I guess this means there's no green shoots in CapEx to fuel the recovery and bridge to the future so we can restore our economy. I hate it when that happens...Meanwhile Pox[sic] Bernanke and the festerin' budget sequesterin' issue is the next long-run coma-inducing drama planned for We the Sheeple.

Its all good, as long as Washington keeps its filthy hands off my disability check!

Sat, 01/19/2013 - 11:48 | 3168760 Dr. Engali
Dr. Engali's picture

I can hear CNBS now.... CAT beats earnings after a one time charge.

Sat, 01/19/2013 - 11:56 | 3168768 Caviar Emptor
Caviar Emptor's picture

New Meme for 13: Write down China. 

Then all past sins will be washed away with an avalanch of new junk bond issuance 

Then the Fed can step in and take all junk bonds onto it's mothership balance sheet

It's a win-win-win-win-win

Sat, 01/19/2013 - 11:55 | 3168771 AssFire
AssFire's picture



Man who buy drowned cat must pay for wet pussy.

Sat, 01/19/2013 - 12:02 | 3168779 joego1
joego1's picture

$650 million deal and the could not afford a audit? Sounds like kickback time to me

Sat, 01/19/2013 - 12:04 | 3168781 rtalcott
rtalcott's picture

No biggie...I mean this is small compared to HP's disasters...

Sat, 01/19/2013 - 12:06 | 3168783 Eally Ucked
Eally Ucked's picture


Sat, 01/19/2013 - 12:12 | 3168789 orangegeek
orangegeek's picture

And corporate flunkies whined like babies when Sarbox showed up in the US.


What to do next? 


Wait - commit frauds in non Sarbox jurisdictions.

Sat, 01/19/2013 - 13:52 | 3168796 Dr. Engali
Dr. Engali's picture

Let's set one thing straight. SarBox isn't meant for companies like CAT... They are above the law and helped write it. SarBox is for companies like mine. To make things more difficult and harder to compete.

Sat, 01/19/2013 - 21:03 | 3169815 willwork4food
willwork4food's picture

The nice men in the white lab coats will be right over, as soon as they totally fuck up my company first.

Sat, 01/19/2013 - 12:18 | 3168795 Never One Roach
Never One Roach's picture

"winning the minds and hearts of investors, one at a time."

Sat, 01/19/2013 - 12:41 | 3168837 oddjob
oddjob's picture

Using the word the punked is a greater crime.

Sat, 01/19/2013 - 13:20 | 3168918 hardcleareye
hardcleareye's picture

Seems apropos to me....

punk'd-       fooled, tricked, made the butt of a practical joke

But perhaps it is not Cat that has been "punk'd"................

Sat, 01/19/2013 - 13:25 | 3168941 oddjob
oddjob's picture

I see the use of that word as confirmation that MSM pablum has been fully digested. Look at the degenerates that make that show, scum of the earth.

Sat, 01/19/2013 - 14:12 | 3169070 hardcleareye
hardcleareye's picture

Your point is well taken but I do like the word....  lol

Sat, 01/19/2013 - 12:45 | 3168846 Svendblaaskaeg
Svendblaaskaeg's picture

Chinese bastards! - I love my T35, best forklift ever made imho

Sat, 01/19/2013 - 12:52 | 3168868 Bruce Krasting
Bruce Krasting's picture

Years ago I dealt with CAT. This was no bunch of dupes back then, I'm sure it is no different today.

If these smart guys can be taken like this, then the average investor is just throwing their money away investing in China.

If the Chinese stock markets take this news like they should (nose dive), then Monday could get interesting.

One thing about this? China is a cesspool for investors, but India is much, much worse....



Sat, 01/19/2013 - 12:58 | 3168880 Never One Roach
Never One Roach's picture

Good point, Bruce. That's another eason why their stock market ha snot 'recovered' namely becuase people there do not trust anyone. Same here in the usa where retail investors are pulling their money out of the fraud-ridden system. It's sad to see how things have changed. People now want hard assets they can store themselves.

Sat, 01/19/2013 - 13:25 | 3168937 azzhatter
azzhatter's picture

I lived in China for 6 years. Did an acquisition from hell while I was there. I can't even begin to tell you the accounting fraud we encountered. We wrote the whole thing off. Fortunately it was pretty small in the grand scheme of things but it is really risky business. I looked at maybe 100 acquisitions while there and everyone was a freakin nightmare.

Sun, 01/20/2013 - 02:58 | 3170240 JuicedGamma
JuicedGamma's picture

Bruce, my friend brought me into a deal as an early investor for a Chinese company ITAT with an interesting business model, but after meeting the CEO I declined as I didn't trust the guy.  A hedge fund also put $50mill into it at that point.  I guess the guy in charge of that investment was none too happy as a year later this popped up  

Any investment (or product for that matter) that comes out of China should be eyed with extreme caution, many people there make corruption a way of life.


Sat, 01/19/2013 - 13:13 | 3168912 Atomizer
Atomizer's picture


If we just start carpet bombing the African region under the intent for liberation, Caterpillar’s Wall Street earnings will rebound.


A Perfect Circle - Counting Bodies Like Sheep to the Rhythm

Is China the OPEC of Rare Metals? 

So we have a new gold rush, either manufacture a $1 trillion dollar coin or steal from the new rare metal markets…. LOL

The Original Beverly Hillbillies Theme Song

Sat, 01/19/2013 - 13:18 | 3168919 Fix It Again Timmy
Fix It Again Timmy's picture

Any competent board member would say: "Fuck the spreadsheets and power points, show me the MONEY...


Sat, 01/19/2013 - 13:22 | 3168931 linrom
linrom's picture

Honestly, can one buy a decent Chinese company; that is, will the Chinese allow westerners to buy companies in China so they could get access to their markets other than chicken and hamburgers?

Sat, 01/19/2013 - 13:26 | 3168940 linrom
linrom's picture

How does a $650 million acquisition account for $580 million in EARNINGS.

Sat, 01/19/2013 - 13:57 | 3169022 Atomizer
Atomizer's picture

The same way banks resold bad mortgage notes.

i.e. ‘You have to buy our portfolio before you can review the risky loan notes repackaged within’. We can assure that your investment will yield a 150% return.

Sat, 01/19/2013 - 13:26 | 3168942 Cheshire
Cheshire's picture

How mant DJ stocks have had bad news in the last 2weeks. Fridays dump of Intel should have got some notice. Intel is the "blue chip" and it was heating up the breakers. The day before BAC and its like HPW and DIS are on some kind of toggle switch. HFTs dont gain control until a few minutes after the open. When it comes it will be right out if the gate.

Sat, 01/19/2013 - 13:45 | 3169004 Black Markets
Black Markets's picture

At least CAT have the common sense not to use US workers to make their products.

Then nobody would buy their kit.

Sat, 01/19/2013 - 16:28 | 3169350 Winston of Oceania
Winston of Oceania's picture

You don't like our lunch parties in the UAW? Plenty of brown bags and funny cigarettes to go around at the park!

Sat, 01/19/2013 - 20:13 | 3169761 Kayman
Kayman's picture

The only Cat equipment that can be trusted to last is still made in the USA.

"Cat Classic" chinese made parts are shit and Cat knows it.

Sat, 01/19/2013 - 13:53 | 3169023 Tom Green Swedish
Tom Green Swedish's picture

Wouldn't say CAT is the smartest company our there from my experience, no that fact has been confirmed.  Everybody knows China does not want to sell anything capital wise to the USA and if you go over there to create a capital intensive business they will steal your knowledge just like they counterfeit expensive fashion.

Sat, 01/19/2013 - 13:57 | 3169035 secret_sam
secret_sam's picture

It's not really "theft" when you get to keep it.

Sat, 01/19/2013 - 14:31 | 3169120 Benjamin Glutton
Benjamin Glutton's picture

ha ha ha...this IS a bribe disguised as a 'deal gone bad'.


same as the JPM CIO 'loss' was used to bail out a dying hedge fund.


so CAT will now repatriate some overseas booty with huge tax exemptions due to overseas losses? hilarious.

Sat, 01/19/2013 - 14:47 | 3169153 Navymugsy
Navymugsy's picture

"It was presented to us as a pretty straightforward transaction. It's a shame. It should have been investigated further."


Thank God they don't want me in a board room. I'm way too stupid to work with these geniuses.

Sat, 01/19/2013 - 15:01 | 3169183 q99x2
q99x2's picture

I've had two close Chinese friends and partners. Both were extremely trustworthy. They both came to the US because of what China is and was like. Wall St. has nothing over on the mainland Chinese.

Sat, 01/19/2013 - 15:34 | 3169243 1929agin
1929agin's picture

Very simple, exposé the investors who gained from buyout in the FIRST place...60 minutes, another " too big to fail " story for the books, when this "cat" is done.

Should have listened to k bass, " don't own Chinese " , can't trust,verify....

C'mon Man.........

CAT meet Chinese mafia?

Blame it on Fukushima radiation

Sat, 01/19/2013 - 18:25 | 3169581 Lost Wages
Lost Wages's picture

I blame it all on Zionist Chinese Jooz.

Sat, 01/19/2013 - 20:17 | 3169764 palmereldritch
palmereldritch's picture

  The Siwei deal came as part of Caterpillar's larger ambitions in China. In early 2012, it added Jon Huntsman, the former U.S. ambassador to China, to its board of directors.

When is there going to be an algo for when notorious globalists are added to a Chinese board?

Sat, 01/19/2013 - 23:50 | 3170090 ZeroFreedom
ZeroFreedom's picture

Why the shock. Corporate M&A and the bankers and accountants do a terrible job of due diligence. Notice again nobody is being fired or where is the lawsuits against the investment bankers and accounting firms for the acquisitions. 


Sat, 01/19/2013 - 23:50 | 3170091 ZeroFreedom
ZeroFreedom's picture

Why the shock. Corporate M&A and the bankers and accountants do a terrible job of due diligence. Notice again nobody is being fired or where is the lawsuits against the investment bankers and accounting firms for the acquisitions. 


Sun, 01/20/2013 - 02:00 | 3170205 tony bonn
tony bonn's picture

the chicoms are as crooked as the wall street crooks because the latter control the former.....caterpillar's dog eating the homework excuse would be hysterical if so much money were not at stake....

if it causes indegestion, take a chill break...

then fire every single board member of caterpillar...and the incompetent cfo and ceo who oversaw the boondoggle....

Sun, 01/20/2013 - 05:21 | 3170295 Bunga Bunga
Bunga Bunga's picture


[Chinaman Laughing Fucking Ass Off]

Sun, 01/20/2013 - 13:27 | 3170639 dunce
dunce's picture

I bought a china company called CTEL that reportly was in hong kong with a big dividend. They sold off their phone business and claimed that they were going to be a media company with no dividends. HUGE loss for me. NO doubt the buyers were family and friends. I have never owned a media company because they have few tangible assets, the real assets walk out the door at 5 every day. I am sure the insiders will continue to use the company offices to run their personal busineses eventually dropping the leases and moving across the hall  with a new name on the door. Caveat emptor.

Sun, 01/20/2013 - 15:54 | 3171000 devo
devo's picture

Yeah China looks good on the surface until you dig in a little.

Mon, 01/21/2013 - 13:03 | 3172990 dadichris
dadichris's picture

I like how Cat pretends they didn't know. 

Mon, 01/21/2013 - 19:05 | 3174005 post turtle saver
post turtle saver's picture

Oh look, CAT is up 2% today and up 9% YTD.

Nothing to see here folks, move on...

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