Raid at CAT May Involve More Than Taxes

The federal government’s extraordinary decision to seek and execute search warrants at the Caterpillar Inc. global headquarters recently indicates company officials may not have been as forthcoming as previously claimed.

That’s the interpretation of former federal prosecutors who spoke generally about the pending criminal investigation but who do not have specific knowledge of the government’s case.

“Investigations like this tend to take years, and the government is often doing things outside of public view,” said Renato Mariotti, a former assistant U.S. attorney in the Northern District of Illinois, who prosecuted white-collar crimes and is now partner with Thompson Coburn in Chicago.

“The government throughout the covert part of the investigation has found things that they believe would be of significant concern, and they have probable cause to believe a crime has been committed,” Mariotti said. “That’s why you would get a search warrant, so you could quickly act.”

Dozens of agents from the Internal Revenue Service, the Federal Deposit Insurance Corp. and the Office of Export Enforcement, which is part of the Department of Commerce’s Bureau of Industry and Security, converged on Caterpillar headquarters in downtown Peoria, a data center in East Peoria and the logistics center in Morton, all in Illinois.

In a message to employees, CEO Jim Umpleby said the company cooperated with investigators regarding offshore tax strategies, but that the government investigation may be looking elsewhere, too.

Investigators seized documents and electronic records related to a broad swath of the company’s business operations, with a particular focus on the movement of money and parts to Switzerland—an apparent continuation of investigations into the company’s Swiss tax strategy—but also authority to take records related to all export business and more.

The company’s offshore tax structures first came to light through a federal employment lawsuit. A Senate probe into those details in 2013 found the company avoided $2.4 billion in U.S. taxes over 13 years by shifting parts profits on paper to a Swiss subsidiary while still maintaining related business operations in the U.S.

The IRS has proposed a $2-billion tax penalty related to those findings, which the company continues to contest.

Source: Peoria Journal-Star