Federal agents carry out raids on Caterpillar offices
CHICAGO — Federal law enforcement officials raided three central Illinois facilities of manufacturer Caterpillar on Thursday as part of an investigation that the company said may be related to business with its Swiss subsidiary CSARL.
Federal agents were seen wheeling large boxes into the Peoria, Ill., headquarters of Caterpillar, one of the world’s largest makers of construction and other heavy equipment. Facilities in East Peoria and Morton, Ill., also were searched under a federal warrant, U.S. Attorney’s Office spokeswoman Sharon Paul said.
Caterpillar spokeswoman Corrie Heck Scott said in an email that the company was cooperating with law enforcement.
Paul said the agencies involved included the Internal Revenue Service’s criminal investigation unit, the U.S. Department of Commerce Office of Export Enforcement and the Federal Deposit Insurance Corp.’s office of inspector general. She declined to comment further on the details of the investigation.
The warrant comes more than two years after the SEC notified Caterpillar that it was conducting an “informal investigation” relating to CSARL and asked the company to preserve relevant documents.
A 2014 report by U.S. Senate Democratic staff said that Caterpillar had avoided paying $2.4 billion in U.S. taxes since 2000 by shifting profits to a wholly controlled affiliate in Switzerland.
The report said Caterpillar paid accounting firm PwC $55 million to develop the tax strategy. Caterpillar transferred the rights to profits from its parts business to a wholly controlled Swiss affiliate called CSARL, even though no employees were moved to Switzerland, the report said.
In exchange, CSARL paid a small royalty, and the income was taxed at a special rate of 4 to 6 percent that Caterpillar negotiated with the Swiss government, the report said.
Before the arrangement, 85 percent of the profits from the parts business were taxed in the U.S., the report said. Afterward, only 15 percent of the profits were taxed in the U.S. The rest was taxed at the special rate in Switzerland, the report said.
Last month, Caterpillar said in a filing with the SEC that it was “vigorously contesting” a notice from the IRS that it owed $2 billion more in U.S. taxes for the years 2010 to 2012 from profits earned by CSARL.