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This month, Watec Corp. launched an internal investigation related to business transactions conducted by subsidiary Pioneer Friction Ltd., located in West Bengal, India.

Through an internal compliance review, Wabtec management discovered that disbursements were made that might be in violation of applicable laws and regulations. The transactions are “inconsequential and not material to the overall operations of Wabtec,” but might result in penalties, according to Wabtec, whose management has not concluded its investigation, but has informed Wabtec’s Audit Committee and board, and the appropriate authorities.

Wabtec had not recorded a reserve related to the matter as of Dec. 31, 2005, because “the company’s potential exposure cannot be estimated based on management’s current assessment of the situation.”

Pioneer is a fourth-tier subsidiary of Wabtec; two intermediate subsidiaries are Australian companies owned by a U.S. holding company.