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O’Melveny’s Wallace Speaks to ALB About Caterpillar Case and US Investment in ChinaMarch 26, 2013
O’Melveny & Myers LLP partner Walker Wallace is interviewed by Asian Legal Business in the article “Mound of Misconduct” which appeared in the March 2013 issue of the publication. The article is about the lessons US companies can learn from Caterpillar’s uncovering of widespread misconduct at the subsidiary of a Chinese company it acquired last summer.
When Wallace, who resides in O’Melveny’s Shanghai office, was asked by ALB if acquiring a Chinese target was generally risky, he responded with, “I would not draw the conclusion from one fraud that buying a Chinese target is generally of higher risk. Fraud happens everywhere that there is a lot of money, and between cases like Enron and Worldcom, places like the US have certainly had problems with fraud in the past. However, there are some pretty typical areas where Chinese companies run into regular problems. For example, underpayment of taxes and social benefits is a recurring problem with most Chinese companies. However, in my experience, a bigger issue in Chinese acquisitions has been questions around the enforceability of contracts and the ability to secure redress in the case of a breach.”
He added, “I would not be surprised if the main lesson to be drawn from the case is that fraud is always a distinct possibility. Unfortunately, people get complacent because of a variety of pressures.”