Federal agents investigate Caterpillar offices

By |  March 6, 2017

Federal officials seized documents and electronic records from three Caterpillar Inc. facilities, including its global headquarters in Peoria, Illinois, reports the Peoria Journal Star.

According to the Peoria Journal Star, the investigation appears to stem from revelations about the company’s tax strategy as outlined in a 2009 wrongful termination lawsuit brought by Daniel Schlicksup. The lawsuit alleged the company shifted profits overseas and to offshore shell companies to avoid paying more than $2 billion in U.S. taxes.

In his complaint against Caterpillar, Schlicksup alleged the company sold and shipped spare parts globally from its warehouse in Morton, Illinois, while attributing at least $5.6 billion of profits from those sales to Caterpillar SARL (CSARL) in Geneva, Switzerland. This scheme, which operated from 2000 to 2009, was known as the “Swiss structure,” reports the Peoria Journal Star.

This accusation, along with another, prompted an inquiry by an investigative panel of the U.S. Senate. Through this, the panel found Caterpillar saved about $2.4 billion in taxes through the “Swiss structure” over the course of 13 years.

The Internal Revenue Service proposed a $2-billion tax penalty related to those findings, which Caterpillar continues to contest, the Peoria Journal Star reports.

The company has cooperated with investigators regarding offshore tax strategies, says Jim Umpleby, CEO of Caterpillar.

“We believe today’s actions, while related to export filings, are connected in part to a previous matter related to our Switzerland-based subsidiary, CSARL, that has been under review for more than three years,” Umpleby says. “Because of the broad nature of today’s warrant, we don’t have enough information at this time to provide a full understanding of the authorities’ intent.”

The Securities and Exchange Commission also raised concerns in 2014 about possible Caterpillar business operations in Syria, Sudan and Cuba. According to the Peoria Journal Star, Caterpillar said business in those countries were a fraction of its total revenues and that it did not have business operations in Cuba.

After the raid, the company’s stock fell $4.22, the Peoria Journal Star reports.

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