U.S. law enforcement searches Caterpillar’s Illinois facilities

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CHICAGO Federal law enforcement officials
searched three facilities of heavy machinery manufacturer
Caterpillar Inc on Thursday, a spokeswoman for the U.S.
Attorney Office for the Central District of Illinois said,
prompting a sharp selloff in the company’s stock.

The spokeswoman, Sharon Paul, confirmed that federal law
enforcement activity was conducted at locations in Peoria, East
Peoria and Morton.

It was not immediately clear why federal agents raided the
three locations.

Caterpillar spokeswoman Corrie Scott said in an emailed
statement that the company was cooperating with authorities.

“Law enforcement is present in various Peoria-area
Caterpillar facilities executing a search warrant. Caterpillar
is cooperating,” Scott said. She declined to comment further.

Caterpillar shares fell 4.6 percent to $94.00 on the news in
afternoon trading.

Agencies involved in the search included the Internal
Revenue Service’s Criminal Investigation Division, the U.S.
Department of Commerce’s Bureau of Industry and Security’s
Office of Export Enforcement, and the Federal Deposit Insurance
Corp.’s Office of Inspector General, the U.S. Attorney Office’s
Paul said.

Caterpillar is fighting an Internal Revenue Service demand
that the company pay $2 billion in taxes and penalties for
profits assigned to a Swiss parts distribution subsidiary,
Caterpillar SARL, or CSARL, according to filings with the
Securities and Exchange Commission. That subsidiary was also the
subject of a 2014 Senate committee report that charged
Caterpillar “shifted billions of dollars in profits away from
the United States.”

Caterpillar, in its annual report, said it is “vigorously
contesting” the IRS demand. “We believe that the relevant
transactions complied with applicable tax laws and did not
violate judicial doctrines,” Caterpillar stated.

Caterpillar also disclosed in its report that it had
received grand jury subpoenas from the U.S. District Court for
the Central District of Illinois seeking documents and
information related to the movement of cash among U.S. and
non-U.S. subsidiaries, and the purchase and resale of
replacement parts by Caterpillar Inc. and non-U.S. Caterpillar
subsidiaries, including Caterpillar SARL. Caterpillar said it is
cooperating with the investigation and did not believe it would
have a material impact on its finances.

Neither the IRS nor the U.S. Department of Commerce’s Office
of Export Enforcement was immediately available for comment. A
spokeswoman for the FDIC referred questions about the action to
the U.S. Attorney’s Office in Illinois.

The facility in Morton, according to the company’s website,
is responsible for receiving and shipping replacement parts to
parts facilities and Caterpillar dealers worldwide.

Seven people, all wearing dark colored jackets marked either
“IRS special agent” or “Police federal agents,” entered the
Caterpillar headquarters, according to a video posted by the
Peoria Journal Star. Several of the agents were armed, while
others were pulling large black roller bags as they entered the
building. (player.tout.com/pjstar/kspupi)

Caterpillar reported sales fell 18 percent in 2016 to $38.5
billion and since late 2015 it has shrunk its workforce by more
than 16,000 employees and consolidated or closed 30 facilities. Caterpillar cut 12,300 jobs in 2016, including 7,700 in the
United States.

It said it was considering closing two more major production
facilities, including one in Aurora, Illinois, and also
announced it was moving its corporate headquarters from Peoria
to Chicago this year. (Reporting by Timothy Mclaughlin and PJ Huffstutter in Chicago,
David Shepardson in Washington and Joe White in Detroit)

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