Federal Search Of Caterpillar Facilities May Relate To Tax Evasion Allegations

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Caterpillar, which manufactures and sells construction equipment and machinery, was subject to a federal search warrant Thursday in Illinois.
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Updated at 10:15 p.m. ET

Three of Caterpillar's facilities in Illinois — including its headquarters — were searched by federal agents on Thursday. The warrant specified a search for evidence of misleading reports related to the company's exports.

Peoria Public Radio reported, "In 2014, the U.S. Senate issued a report that may be related to today's ... search. The 99-page document was titled 'Caterpillar's Offshore Tax Strategy.' The report alleges Caterpillar used the subsidiary to avoid paying $2.4 billion in taxes over a period of 13 years," the member station reported.

Copies of the warrants for the three facilities as obtained by Peoria Public Radio indicate that while evidence pertaining to dealings of Caterpillar subsidiary CSARL in Switzerland was the focus of the search, agents were authorized to collect documents about Caterpillar's sales outside the U.S. and shipments to any other foreign country.

Some Caterpillar employees were interviewed by authorities, according to Peoria Public Radio.

Caterpillar said it is cooperating with authorities.

Sharon Paul of the U.S. Attorney's Office would say only that multiple agencies — including the Internal Revenue Service's Criminal Investigation Division and the Commerce Department's Office of Export Enforcement — were at Caterpillar facilities in Peoria, East Peoria and Morton, Ill.

The tax allegations were explored in the Peoria Journal Star which reported on a 2009 federal wrongful termination lawsuit brought by Daniel Schlicksup.

The newspaper notes that:

"The lawsuit alleged the company shifted profits overseas and to offshore shell companies to avoid paying more than $2 billion in U.S. taxes. Schlicksup settled the suit in 2012.

"Caterpillar, in its annual 10-K filing with the U.S. Securities and Exchange Commission last month, acknowledged a criminal investigation into the tax strategy."

Ranked 59th on the Fortune 500 list, Caterpillar is one of the world's largest manufacturers and sellers of construction equipment and machinery. Its shares had dropped about 4 percent by the closing bell Thursday.

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