Caterpillar Says Warrant For Fed Raid Is About Swiss Business

Mar 3, 2017

Caterpillar says it believes that a search warrant executed by federal authorities on Thursday at its facilities concerns "export filings" related to its Switzerland subsidiary CSARL.

Federal officials executed search warrants at several offices of Caterpillar Inc. in Peoria, East Peoria and Morton. People wearing navy blue jackets labeled IRS and Federal Agents carried boxes out of the headquarters building.

The identical search warrants allowed the federal government to seize a wide range of documents, hardware and software related to the movement of any products between the U.S. and Switzerland, specifically the Swiss Subsidiary Caterpillar created.

The number of vehicles and reports from inside Caterpillar indicate this is a multi-agency effort, including the IRS, FDIC, and The Department of Commerce-Bureau of Industry and Security. The Illinois State Police also appear to be assisting. 

While many employees seem to be unaffected by the federal search, others are being interviewed individually by authorities. Some have been sent home.

In 2014, the U.S. Senate issued a report that may be related to today’s criminal search. The 99-page report 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.

Most recently, in early 2015, a federal court in Illinois subpoenaed the company for documents and information relating to the distribution of profits and movement of cash among its subsidiaries. It's not clear if that matter has been settled or if it is related to Thursday's search.

A statement from the company says only that a federal search warrant is indeed being executed at several Caterpillar facilities and that the company is cooperating to the fullest extent.

“I’m troubled by the events at Caterpillar today, but I am pleased to see they are cooperating with federal authorities,” said Democratic U.S. Rep. Cheri Bustos, whose 17th Congressional District includes the Peoria area. “I will continue to closely monitor this situation as it develops.”

Sharon Paul, a spokeswoman for the U.S. attorney’s office for the Central District of Illinois, told the Chicago Tribune that agencies involved included the Internal Revenue Service's Criminal Investigation Division, the Office of Export Enforcement at the U.S. Department of Commerce's Bureau of Industry and Security, and the Federal Deposit Insurance Corp.'s Office of Inspector General.

In 2014, the SEC subpoenaed Caterpillar seeking information about the company's accounting related to its acquisition of Bucyrus International in 2011. It's not clear if that investigation is ongoing or completed.

In 2013 and 2014, Caterpillar subsidiary Progress Rail was the target of two investigations into environmental and other violations, at least one of which was settled with a California agency. Also in 2014, two other subsidiaries were under investigation for anticompetitive bid practices in Brazil and criminal charges were brought against three employees of those subsidiaries.

In January, the company announced it plans to move its global headquarters and about 300 top jobs to the Chicago area after decades in Peoria. Caterpillar also scrapped plans to build a new headquarters in downtown Peoria, which is located about 175 miles southwest of Chicago.

Caterpillar’s stock price was down nearly 4.3 percent when the New York markets closed.

  • Tanya Koonce, Cass Herrington, Daryl Scott, H Wayne Wilson, and Victor Yehling contributed to this article.