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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CDC: Flu seems to level off except in the West

New government figures show that flu cases seem to be leveling off nationwide. Flu activity is declining in most regions although still rising in the West.

The Centers for Disease Control and Prevention says hospitalizations and deaths spiked again last week, especially among the elderly. The CDC says quick treatment with antiviral medicines is important, in particular for the very young or old. The season's first flu case resistant to treatment with Tamiflu was reported Friday.

Eight more children have died from the flu, bringing this season's total pediatric deaths to 37. About 100 children die in an average flu season.

There is still vaccine available although it may be hard to find. The CDC has a website that can help.

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CDC: http://www.cdc.gov/flu/

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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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At least 26 die in Egyptian clashes over death sentences

PORT SAID, Egypt/CAIRO (Reuters) - At least 26 people died on Saturday when Egyptians rampaged in protest at the sentencing of 21 people to death over a soccer stadium disaster, adding to bloody street turmoil confronting Islamist President Mohamed Mursi.

Armored vehicles and military police fanned through the streets of Port Said after the violence. The state news agency quoted a general as saying the military aimed to "establish calm and stability in Port Said and to protect public institutions".

Unrest flared with nationwide rallies on Friday to mark the second anniversary of the overthrow of autocrat Hosni Mubarak, a democratic revolution that protesters now accuse Mursi of betraying by ramming through an Islamist-hued constitution.

While anniversary-related violence subsided, a new outbreak hit Port Said after a court sentenced 21 men to die for involvement in the deaths of 74 people after a local soccer match on February 1, 2012, many of them fans of the visiting team.

Residents ran wildly through the streets of Port Said, outraged that men from their city had been blamed for the stadium disaster, and gunshots were reported near the prison where most of the defendants were being held.

Security sources said 26 people, at least two of them policemen, had been killed in the Mediterranean coastal city. State television reported more than 200 people had been wounded.

Witnesses said some men stormed two police stations in Port Said, where protesters lit tires in the street, sending black smoke funneling into the air.

At least nine people were killed in clashes with police on Friday, mainly in the port of Suez where the army has also deployed. Hundreds were injured as police rained down tear gas on protesters armed with stones and some with petrol bombs.

The schism between Islamists and secular Egyptians is hurting efforts by Mursi, freely elected in June, to revive an economy in crisis - deprived of fresh investment and tourism due to political upheaval - and stem a slide in Egypt's currency.

The political strife and lack of security that has blighted the Arab world's most populous country over much of the post-Mubarak era is casting an ominous shadow over a parliamentary election expected to start in April.

DIVERSITY

Highlighting tensions, the opposition National Salvation Front coalition called for a government of national unity and an early presidential vote among other demands. It said it would call for more protests next Friday and could boycott the parliamentary election if its demands are not met.

Mursi's opponents say he has failed to deliver on economic pledges or be a president representing the full political and communal diversity of Egyptians, as he pledged.

His supporters say his critics do not respect the democracy that has given Egypt its first freely elected leader.

The Muslim Brotherhood, which propelled Mursi to office, said in a statement that "corrupt people" and media who were biased against the president had stirred up anger on the street and incited violence.

At the Port Said soccer stadium a year ago, many spectators were crushed and witnesses saw some thrown off balconies after the match between Cairo's Al Ahly and local team al-Masri.

Families of victims in court cheered and wept for joy when Judge Sobhy Abdel Maguid read a list of 21 names "referred to the Mufti", a phrase used to denote execution, as all death sentences must be reviewed by Egypt's top religious authority.

A total of 73 people have been standing trial. Other rulings will be issued on March 9, the judge said.

One relative in the court shouted: "God is greatest." Outside the Al Ahly club in Cairo, fans also cheered. They had threatened more violence unless the death penalty was meted out.

Thousands took to the streets of Cairo, Alexandria and other cities on Friday to protest against what they call the creeping authoritarianism of Mursi's rule. Protesters in Cairo were again hurling stones at police lines in Cairo on Saturday.

SEEKING CHANGE

"We want to change the president and the government. We are tired of this regime. Nothing has changed," said Mahmoud Suleiman, 22, in Cairo's Tahrir Square, the cauldron of the 2011 anti-Mubarak revolt and near where youths stoned police.

Ahmed Salama, 28, a protester camped out with dozens of others in Tahrir, said: "The protests will continue until we realize all the demands of the revolution - bread, freedom and social justice."

Ismailia and Suez, cities which like Port Said lie on the Suez Canal, witnessed some of the worst violence on Friday. But a canal official said the unrest on Friday and Saturday had not disrupted traffic in the waterway vital to international trade.

In a statement in response to Friday's violence, Mursi said the state would not hesitate in "pursuing the criminals and delivering them to justice". He urged Egyptians to respect the principles of the revolution by expressing views peacefully.

The president met on Saturday with the National Defence Council, which includes senior ministers and security officials, to discuss the spate of violence.

In a televised statement, the National Salvation Front said it was holding Mursi responsible for the disturbances.

The Front was formed from disparate groups last year when Mursi awarded himself extra powers and fast-tracked an Islamist-flavored constitution to a referendum, opposed by the Front although the document was passed in the popular vote.

"Egypt will not regain its balance except by a political solution that is transparent and credible, by a government of national salvation to restore order and heal the economy and with a constitution for all Egyptians," prominent opposition politician Mohamed ElBaradei wrote on his Twitter account.

Until the Front was formed, the opposition had struggled to unite and their vote had been split at presidential and parliamentary polls, helping Islamists. The last parliament was dissolved based on court order, demanding a new vote this year.

Mustapha Kamal Al-Sayyid, a professor of political science at Cairo University, said the latest violence reflected the frustration of many liberal-minded Egyptians and others.

"The state of polarization between Islamists and others is most likely to continue and will have a very negative impact on the state's politics, security and economy," he said.

Inspired by the popular uprising in Tunisia, Egypt's revolution spurred further revolts across the Arab world. But the sense of common purpose among Egyptians two years ago has unraveled, triggering bloody street battles last month.

(Additional reporting by Omar Fahmy; Writing by Edmund Blair; Editing by Mark Heinrich)

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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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CDC: Flu seems to level off except in the West

New government figures show that flu cases seem to be leveling off nationwide. Flu activity is declining in most regions although still rising in the West.

The Centers for Disease Control and Prevention says hospitalizations and deaths spiked again last week, especially among the elderly. The CDC says quick treatment with antiviral medicines is important, in particular for the very young or old. The season's first flu case resistant to treatment with Tamiflu was reported Friday.

Eight more children have died from the flu, bringing this season's total pediatric deaths to 37. About 100 children die in an average flu season.

There is still vaccine available although it may be hard to find. The CDC has a website that can help.

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CDC: http://www.cdc.gov/flu/

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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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North Korea threatens war with South over U.N. sanctions

SEOUL (Reuters) - North Korea threatened to attack rival South Korea if Seoul joined a new round of tightened U.N. sanctions, as Washington unveiled more of its own economic restrictions following Pyongyang's rocket launch last month.

In a third straight day of fiery rhetoric, the North directed its verbal onslaught at its neighbor on Friday, saying: "'Sanctions' mean a war and a declaration of war against us."

The reclusive North has this week declared a boycott of all dialogue aimed at ending its nuclear program and vowed to conduct more rocket and nuclear tests after the U.N. Security Council censured it for a December long-range missile launch.

"If the puppet group of traitors takes a direct part in the U.N. 'sanctions,' the DPRK will take strong physical counter-measures against it," the North's Committee for the Peaceful Reunification of Korea said, referring to the South.

The committee is the North's front for dealings with the South. DPRK is short for the North's official name, the Democratic People's Republic of Korea.

The U.N. Security Council unanimously condemned North Korea's December rocket launch on Tuesday and expanded existing U.N. sanctions.

On Thursday, the United States slapped economic sanctions on two North Korean bank officials and a Hong Kong trading company that it accused of supporting Pyongyang's proliferation of weapons of mass destruction.

The company, Leader (Hong Kong) International Trading Ltd, was separately blacklisted by the United Nations on Wednesday.

Seoul has said it will look at whether there are any further sanctions that it can implement alongside the United States, but said the focus for now is to follow Security Council resolutions.

The resolution said the council "deplores the violations" by North Korea of its previous resolutions, which banned Pyongyang from conducting further ballistic missile and nuclear tests and from importing materials and technology for those programs. It does not impose new sanctions on Pyongyang.

The United States had wanted to punish North Korea for the rocket launch with a Security Council resolution that imposed entirely new sanctions against Pyongyang, but Beijing rejected that option. China agreed to U.N. sanctions against Pyongyang after North Korea's 2006 and 2009 nuclear tests.

NUCLEAR TEST WORRY

North Korea's rhetoric this week amounted to some of the angriest outbursts against the outside world coming under the leadership of Kim Jong-un, who took over after the death of his father Kim Jong-il in late 2011.

On Thursday, the North said it would carry out further rocket launches and a nuclear test, directing its ire at the United States, a country it called its "sworn enemy".

U.S. Defense Secretary Leon Panetta said the comments were worrying.

"We are very concerned with North Korea's continuing provocative behavior," he said at a Pentagon news conference.

"We are fully prepared ... to deal with any kind of provocation from the North Koreans. But I hope in the end that they determine that it is better to make a choice to become part of the international family."

North Korea is not believed to have the technology to deliver a nuclear warhead capable of hitting the continental United States, although its December launch showed it had the capacity to deliver a rocket that could travel 10,000 km (6,200 miles), potentially putting San Francisco in range, according to an intelligence assessment by South Korea.

South Korea and others who have been closely observing activities at the North's known nuclear test grounds believe Pyongyang is technically ready to go ahead with its third atomic test and awaiting the political decision of its leader.

The North's committee also declared on Friday that a landmark agreement it signed with the South in 1992 on eliminating nuclear weapons from the Korean peninsula was invalid, repeating its long-standing accusation that Seoul was colluding with Washington.

The foreign ministry of China, the North's sole remaining major diplomatic and economic benefactor, repeated its call for calm on the Korean peninsula at its daily briefing on Friday.

"The current situation on the Korea peninsula is complicated and sensitive," spokesman Hong Lei said.

"We hope all relevant parties can see the big picture, maintain calm and restraint, further maintain contact and dialogue, and improve relations, while not taking actions to further complicate and escalate the situation," Hong said.

But unusually prickly comments in Chinese state media on Friday hinted at Beijing's exasperation.

"It seems that North Korea does not appreciate China's efforts," said the Global Times in an editorial, a sister publication of the official People's Daily.

"Just let North Korea be 'angry' ... China hopes for a stable peninsula, but it's not the end of the world if there's trouble there. This should be the baseline of China's position."

(Additional reporting by Michael Martina in Beijing; editing by Jeremy Laurence and Raju Gopalakrishnan)

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