Caterpillar's China woes warn foreign investors

SHANGHAI: Caterpillar's revelation it found fake accounts at a just-acquired Chinese firm which will cost it hundreds of millions of dollars is a cautionary tale for those looking to enter the hugely promising market.

The US equipment giant said this month it would take a $580 million charge after uncovering "accounting misconduct" at Siwei Mechanical and Electrical Manufacturing Co., which it bought last year for at least $650 million.

Caterpillar, one of the first US manufacturers to start exporting to China nearly four decades ago and which opened its first Beijing office in 1978, said it had removed several top Siwei managers for overstating profits.

Analysts said the stumble by a Chinese market veteran served as a reminder of the pitfalls of doing business in the world's most populous country.

"This is going to teach firms that they've really got to do due diligence, especially when they see a company as large as Caterpillar run into a situation like this," said Ben Cavender, of Shanghai-based consultancy China Market Research Group.

But there would still be strong demand to invest in it, he added.

Foreign investors have poured more than $1.0 trillion into China since it launched economic reforms in 1978, with $112 billion last year alone.

The country became the world's second most attractive location for foreign investment in 2008, behind only the United States, according to the Organisation for Economic Co-operation and Development.

Foreign companies that arrived early and persisted are now among the most successful, analysts say, but some met spectacular failure.

The travails of American Motors Corp. - later bought by Chrysler - to produce its iconic Jeep brand in China in the 1980s are documented in the book "Beijing Jeep" by the author James Mann.

US aircraft maker McDonnell Douglas announced in 1994 it would manufacture 20 MD-90 planes in China, but fell way short due to technical and regulatory issues. The project was quietly scrapped after Boeing took over the company.

Analysts see a link between Caterpillar's experience and a series of accounting scandals involving Chinese firms listed in the United States and other overseas markets which burned shareholders.

Investors in Toronto-listed Sino-Forest Corp. lost hundreds of millions of dollars when it collapsed following allegations it had misstated its revenue and exaggerated the size of its plantations in China.

"There's been a whole series of disclosures which relate to very poor due diligence of US-listed Chinese companies, and there's a parallel there," said Steve Vickers, founder of a Hong Kong-based risk consultancy.

Sharp increases in profits and a firm which has been through a reverse takeover - in which a private company seeking to go public merges with an already quoted one but controls most of the new entity - are warning signs, Vickers said.

Financial reporting requirements are not as stringent for reverse takeovers as they are for traditional initial public offerings and the technique became controversial after Chinese firms that used it to list in the US were found to have accounting problems.

"Reverse takeovers, sudden rises in profit of massive scale are glaringly obvious examples of what people should look for. To me, that would be a huge alarm bell," Vickers said.

Siwei become publicly traded by taking over Hong Kong-listed ERA in a reverse takeover. In turn, Caterpillar announced it was buying ERA in 2011, saying the deal would allow it to find more customers in China.

Caterpillar discovered the problems five months after completing the transaction, and said it believed its process for vetting mergers and acquisitions was "rigorous and robust", according to a statement.

It said it was still investigating and would consider options, including litigation, to recover its losses, adding it was unaware of any criminal investigations by the Chinese or US governments so far.

The Wall Street Journal reported that two foreign investors controlled just under half of ERA's shares before the Caterpillar deal: former head of the American Chamber of Commerce in China, Emory Williams, and James Thompson III, son of the founder of moving company Crown Worldwide Group.

A spokesman for Caterpillar, based in the US state of Illinois, declined to comment on Friday.

- AFP/de

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Mob lynches two suspected Garo militants

SHILLONG: In a case of vigilante justice, two persons, believed to be cadre of Garo National Liberation Army outfit, were lynched by a mob in retaliation against their extortion attempt in south west Khasi hills district, police said on Sunday.

The two had come to the area apparently to extort from coal labourers at Tyrah coal quarry near Nonghyllam village in the district, a police officer said.

As the duo roughed up some villagers including coal labourers, a mob got hold of them and beat both to death, the officer said.

"A diary recovered from one of the deceased indicates that he could be Holy T Sangma, a wanted cadre of GNLA," the officer said.

The identity of the second man was still not clear. Demand notes bearing the name of GNLA and a 'khukri' (sharp weapon) were also recovered from the deceased.

GNLA is active in the coal-rich areas of west Khasi Hills besides Garo Hills region.

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Pictures: The Story Behind Sun Dogs, Penitent Ice, and More

Photograph by Art Wolfe, Getty Images

If you want the beauty of winter without having to brave the bone-chilling temperatures blasting much of the United States this week, snuggle into a soft blanket, grab a warm beverage, and curl up with some of these natural frozen wonders.

Nieve penitente, or penitent snow, are collections of spires that resemble robed monks—or penitents. They are flattened columns of snow wider at the base than at the tip and can range in height from 3 to 20 feet (1 to 6 meters). The picture above shows the phenomenon in central Chile. (See pictures of the patterns in snow and ice.)

Nieve penitente tend to form in shallow valleys where the snow is deep and the sun doesn't shine at too steep an angle, said Kenneth Libbrecht, a physicist at the California Institute of Technology in Pasadena who studies ice crystal formation.

As the snow melts, dirt gets mixed in with the runoff and collects in little pools here and there, he said. Since the dirt is darker in color than the surrounding snow, the dirty areas melt faster "and you end up digging these pits," explained Libbrecht.

"They tend to form at high altitude," he said. But other than that, no one really knows the exact conditions that are needed to form penitent snow.

"They're fairly strong," Libbrecht said. "People have found [the spires] difficult to hike through."

—Jane J. Lee

Published January 25, 2013

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Authorities: 245 Dead in Brazil Nightclub Fire

A deadly fire swept through a crowded nightclub in southern Brazil early Sunday, killing at least 245 people attending a university party and leaving at least 200 injured, police and firefighters said. It appeared to be the deadliest nightclub fire in more than a decade.

Witnesses said that a flare or firework lit by band members may have started the fire.

Police Maj. Cleberson Braida told local news media that the 245 bodies were brought for identification to a gymnasium in the city of Santa Maria, at the southern tip of Brazil near the borders with Argentina and Uruguay

Television images showed smoke pouring out of the Kiss nightclub as shirtless, young male partygoers joined firefighters in wielding axes and sledgehammers, pounding at windows and walls to break through to those trapped inside. Teenagers sprinted from the scene desperately trying to find help — others carried injured and burned friends away in their arms.

"There was so much smoke and fire, it was complete panic and it took a long time for people to get out, there were so many dead," survivor Luana Santos Silva told the Globo TV network.

Silva added that firefighters and ambulances responded quickly after the fire broke out, but that it spread too fast inside the packed club for them to help.

Michele Pereira, another survivor, told the Folha de S. Paulo newspaper that she was near the stage and that the fire broke out after band members lit flares.

Germano Roratto/AFP/Getty Images

"The band that was onstage began to use flares and, suddenly, they stopped the show and pointed them upward. At that point the ceiling caught fire. It was really weak but in a matter of seconds it spread," Pereira said.

Civil Police and regional government spokesman Marcelo Arigoni told Radio Gaucha earlier that the total number of victims is still unclear and there may be hundreds injured. Officials earlier said 180 were killed.

Rodrigo Moura, identified by the newspaper Diario de Santa Maria as a security guard at the club, said it was at its maximum capacity of between 1,000 and 2,000, and partygoers were pushing and shoving to escape.

Ezekiel Corte Real, 23, was quoted by the paper as saying that he helped people to escape. "I just got out because I'm very strong," he said.

The fire led President Dilma Roussef to cancel a series of meetings she had scheduled at a summit of Latin American and European leaders in Chile's capital of Santiago, and was headed to Santa Maria, according to the Brazilian foreign ministry.

"It is a tragedy for all of us. I am not going to continue in the meeting (in Chile) for very clear reasons," she said.

"Sad Sunday", tweeted Tarso Genro, the governor of the southern state of Rio Grande do Sul. He said all possible action was being taken and that he would be in the city later in the day.

Santa Maria is a major university city with a population of around a quarter of a million.

A welding accident reportedly set off a Dec. 25, 2000, fire at a club in Luoyang, China, killing 309.

At least 194 people died at an overcrowded working-class nightclub in Buenos Aires, Argentina, in 2004. Seven members the band were sentenced to prison for setting off the blaze.

A blaze at the Lame Horse nightclub in Perm, Russia, broke out on Dec. 5, 2009, when an indoor fireworks display ignited a plastic ceiling decorated with branches, killing 152

A nightclub fire in the U.S. state of Rhode Island in 2003 killed 100 people after pyrotechnics used as a stage prop by the 1980s rock band Great White set ablaze cheap soundproofing foam on the walls and ceiling.

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Court says Obama exceeded authority in making appointments

President Obama exceeded his constitutional authority by making appointments when the Senate was on a break last year, a federal appeals court ruled Friday. The court’s broad ruling would sharply limit the power that presidents throughout history have used to make recess appointments in the face of Senate opposition and inaction.

A unanimous three-judge panel of the U.S. Court of Appeals for the District of Columbia Circuit flatly rejected the Obama administration’s rationale for appointing three members of the National Labor Relations Board (NLRB) while the Senate was on a holiday break.

Chief Judge David B. Sentelle sharply criticized the administration’s interpretation of when recess appointments may be made, saying it would give the president “free rein to appoint his desired nominees at any time he pleases, whether that time be a weekend, lunch, or even when the Senate is in session and he is merely displeased with its inaction.” He added, “This cannot be the law.”

The issue seems certain to end up before the Supreme Court, which ultimately could clarify a president’s authority to fill his administration and appoint federal judges when a minority of the Senate blocks consideration of his choices.

Although recess appointments have been made throughout the nation’s history, they have been more commonly made by modern presidents who face partisan opposition that has made it hard for nominees to even receive a vote in the Senate.

Additionally, Friday’s decision casts doubt on hundreds of decisions the NLRB has made in the past year, ranging from enforcement of collective-bargaining agreements to rulings on the rights of workers to use social media.

The ruling also raises questions about the recess appointment of former Ohio attorney general Richard Cordray to head the fledgling Consumer Financial Protection Bureau and about the actions taken by the agency during his tenure, including major new rules governing the mortgage industry. Obama named Cordray at the same time as the NLRB nominees, and his appointment is the subject of a separate lawsuit in D.C. federal court.

The White House criticized the court ruling. “The decision is novel and unprecedented, and it contradicts 150 years of practice by Democratic and Republican administrations,” White House press secretary Jay Carney told reporters Friday. “We respectfully but strongly disagree with the ruling.”

Presidents from both parties have made hundreds of recess appointments when the Senate has failed to act on nominations. Ronald Reagan holds the record with 243. Obama’s predecessor, George W. Bush, made 105, and it was during his term that Senate Democrats began holding pro-forma sessions, some lasting less than a minute, when the Senate went on break. They contended that that kept the Senate in session and did not allow Bush to make recess appointments.

Republicans took up the practice when Obama was elected. But Obama decided to challenge it in January 2012, when the Senate was on a 20-day holiday but holding pro-forma sessions every three business days to block presidential action.

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PM Lee congratulates Workers' Party on by-election win, calls on people to come together as one

Singapore: Prime Minister Lee Hsien Loong has congratulated the Workers' Party and MP-elect Ms Lee Li Lian for winning the Punggol East by-election.

He said in a statement issued just after the by-election results were announced that he respects the choice of Punggol East voters.

"Now that the Punggol East by-election is over, we should re-focus on national issues" said Mr Lee in his media release.

He said Singapore has a heavy agenda coming up, such as The White Paper on Population that will soon be debated in Parliament, and Budget 2013 which is less than a month away.

"Let us come together as one people to do our best for Singapore" said PM Lee.

He said the PAP fielded a good candidate and Dr Koh Poh Koon had showed character and courage in contesting this election, and did the PAP proud.

Mr Lee noted that many voters were impressed by Dr Koh's sincerity and commitment. But unfortunately there were not enough of them for him to win, as he went on to thank all those who voted for Dr Koh and the PAP.

- CNA/sf

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Rajasthan must act against Nandy for casteist comments: Mayawati

NEW DELHI: BSP leader Mayawati on Saturday demanded that the Rajasthan government take strong action against social scientist Ashis Nandy for his comments linking OBCs, the SCs and the STs to corruption and that he be told to leave the Jaipur Literature Festival.

Talking to reporters here, Mayawati said Nandy's comments were "wrong, baseless and unfortunate" and reflected casteist mindset.

They were made as part of a thought-out conspiracy to defame people from these communities, said the Bahujan Samaj Party (BSP) supremo.

"Hence, the Rajasthan government should take strong action against him without delay," Mayawati said.

She said the organisers should also immediately "throw out" Nandy from the festival for his "casteist remarks".

Asked if the BSP will raise the issue in the budget session of parliament, she said the party will take into account steps taken by the Rajasthan government, the organisers and the "kind of apology" tendered by Nandy.

Nandy stirred up a row at Jaipur Literature Festival on Saturday, saying most of the corrupt in the country were people from the other backwards classes (OBC), the Scheduled Castes (SCs) and the Scheduled Tribes (STs).

"It will be an undignified, even vulgar statement. But it is a fact that most of the corrupt come from the OBC, the Scheduled Castes and now increasingly the STs and as long as it is the case, the Indian republic will survive," he said at a session titled "Republic of Ideas".

"I will give an example. The state of least corruption is West Bengal. In 100 years, nobody from the backward classes and SC and ST have come anywhere near power in West Bengal. It is an absolutely clean state," he said.

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Pictures: The Story Behind Sun Dogs, Penitent Ice, and More

Photograph by Art Wolfe, Getty Images

If you want the beauty of winter without having to brave the bone-chilling temperatures blasting much of the United States this week, snuggle into a soft blanket, grab a warm beverage, and curl up with some of these natural frozen wonders.

Nieve penitente, or penitent snow, are collections of spires that resemble robed monks—or penitents. They are flattened columns of snow wider at the base than at the tip and can range in height from 3 to 20 feet (1 to 6 meters). The picture above shows the phenomenon in central Chile. (See pictures of the patterns in snow and ice.)

Nieve penitente tend to form in shallow valleys where the snow is deep and the sun doesn't shine at too steep an angle, said Kenneth Libbrecht, a physicist at the California Institute of Technology in Pasadena who studies ice crystal formation.

As the snow melts, dirt gets mixed in with the runoff and collects in little pools here and there, he said. Since the dirt is darker in color than the surrounding snow, the dirty areas melt faster "and you end up digging these pits," explained Libbrecht.

"They tend to form at high altitude," he said. But other than that, no one really knows the exact conditions that are needed to form penitent snow.

"They're fairly strong," Libbrecht said. "People have found [the spires] difficult to hike through."

—Jane J. Lee

Published January 25, 2013

Read More..

Cops Using More Private Cameras to Nab Suspects

Philadelphia detectives were able to quickly make an arrest in the murder and burning of a female pediatrician by viewing surveillance video of nearby stores and a hospital that captured the suspect entering the doctor's home and later getting into his truck.

In the hours after Dr. Melissa Ketunuti's body was found strangled and burning in her basement, city's Homicide Task Force collected surveillance footage from a coffee shop, drug store and hospital overlooking Ketunuti's block. It was footage taken from Ori Feibush's coffee shop that allowed cops to identify Smith.

The suspect, an exterminator named Jason Smith, soon confessed to detectives, police said.

Lately a range of crimes have been solved by the seemingly ubiquitous security videos maintained by private companies or citizens, and investigators have been able to quickly apprehend suspects by obtaining the video, deftly turning private cameras into effective police resources.

Philadelphia Police Arrest Suspect in Doctor's Killing Watch Video

Pa. Doctor Killing: Person of Interest in Custody Watch Video

Private surveillance cameras have become so pervasive that the face of a suspect who allegedly shot a Bronx, N.Y., cab driver in a botched robbery on Jan. 14 was splashed throughout the media within days because the cabbie had rigged his vehicle with a camera.

The New York Police Department arrested Salvatore Perrone after he was caught on surveillance video recorded near two of three shopkeeper slayings in Brooklyn, N.Y., in November. He has since been charged with murder.

And in Mesa, Ariz., surveillance footage taken in November by resident Mitch Drum showed a man rolling on the ground trying to extinguish flames that had engulfed his shirt, which had caught fire while he was allegedly siphoning gas from a car by Drum's house. The man was arrested.

Though surveillance cameras have been a staple of security since a network of government operated cameras dubbed the "ring of steel" was introduced in London in the early 1990s, police have recently launched programs to partner with more businesses.

In Philadelphia, police have launched a program for businesses to register private cameras with the department. According to the SafeCam website, businesses will only be contacted when there is a criminal incident in the vicinity of the security camera. At that point, police will request a copy of the footage for their investigation.

"Businesses are saying, 'I have a camera at this location, and it may or may not be of use to you. It's a registration to say, 'feel free to call me,'" Sgt. Joseph Green told ABCNews.com

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US scholar urges dramatic rethink on Taiwan

WASHINGTON: With Beijing growing in strength, a US scholar is calling for a major rethink on Taiwan in which the island would cut its troop numbers in half and rebrand its army as a self-defence force.

The proposal marks a rare break from the conventional view of American and Taiwanese policymakers that the island needs to close the military gap with Beijing, but its author said an opposite course could strengthen Taipei.

Scott Bates, president of the Washington-based Center for National Policy, said the balance was "irretrievably shifting" in China's favor and it was politically and economically unrealistic that Taiwan would commit enough to close the gap.

Instead, Taipei can take the lead by halving the size of its army, rebranding it as a Self-Defence Force in the style of Japan and renouncing any military action on mainland China's soil, he argued.

"If Taiwan were to take a bold step like this, that would change perceptions on the mainland and perhaps win some popular support for the Taiwanese position," said Bates, a former congressional aide.

"If there were a showdown, it might make (Beijing) think twice."

Taiwan should turn the new force into a disaster response team ready to deploy throughout Asia and also highlight the island's democracy through a major initiative that supports civil society across the continent, Bates said.

And instead of waging a battle to preserve a dwindling number of nations' recognition of Taipei instead of Beijing, Taiwan can use its diplomatic resources to seek solutions on Asia's bitter territorial disputes, he said.

The new Taiwanese approach would give the island the moral high ground, winning over global opinion and ensuring that China would appear to be the aggressor if it attacked, he argued.

"Mainland Chinese public opinion is beginning to matter more. The Chinese Communist Party cannot ignore its own people without repercussions," Bates said.

China considers Taiwan to be a territory awaiting reunification, by force if necessary. China's defeated nationalists fled to Taiwan after defeat by the communists in 1949, with the island developing into a self-ruling democracy.

The United States switched recognition from Taipei to Beijing in 1979 but at the same time Congress passed the Taiwan Relations Act, which requires Washington to provide the island with means to defend itself.

Bates said that his proposal would complement efforts by Taiwan President Ma Ying-jeou, who has sought to ease tensions with China by expanding economic ties, though domestic critics accuse Ma of jeopardising the island's de facto independence.

Bates supported the continuation of the Taiwan Relations Act, saying the island needed a credible deterrent. While cutting its army, Bates called for Taiwan to launch a major upgrade of its air defences and navy to show that any effort to gain supremacy over the island would be costly.

The Taiwan Relations Act enjoys virtually unanimous support in the US Congress, where lawmakers have pressed President Barack Obama to sell to the island new F-16 jets - a step that China strongly opposes.

Bates' ideas, however, are unlikely to win quick support.

Joseph Bosco, a former Pentagon official, sharply criticised the proposal, saying it went against accepted concepts of deterrence and that Taiwan already had the moral high ground.

"Taiwan does not need to disarm unilaterally in order to prove its moral or political legitimacy," Bosco said on Wednesday at an event where Bates presented his proposal.

Bates, who spoke last year at Taiwan's National Defence University and wrote an opinion piece in the Taipei Times, said he wanted to start a debate.

"It doesn't have to be my plan, but there does have to be a strategic rethink," he said.

- AFP

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