Caterpillar reveals fraud at Chinese unit (2)

The SFC and HKSE both declined to comment on the issue when reached by the Global Times Monday.

Penny Wu, a member of the Global Government & Corporate Affairs department at Caterpillar, told the Global Times Monday that no additional information about the investigation could be released by press time.

However, the discovery of the misconduct at Siwei will not change Caterpillar's strategy for China, and "we continue to believe that the Siwei acquisition is well aligned with the strategy to expand our role as an equipment and solutions provider for the Chinese coal mining industry," Steve Wunning, Caterpillar group president with responsibility for Resource Industries, said in the statement.

Ji of Zero2IPO suggested that foreign companies should develop a comprehensive due diligence process before conducting M&A deals in China.

A former member of the Caterpillar board was quoted by Reuters as saying that the board was distracted at the time of the ERA acquisition by another larger transaction, and had paid relatively little attention to the deal.

"It came as a complete surprise to us. It was presented to us as a pretty straightforward transaction. It's a shame. It should have been investigated further," the former board member, who preferred to remain anonymous because of the sensitivity of the situation, was quoted as saying by Reuters.

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