Federal law enforcement authorities, including the U.S. Department of Justice and the Internal Revenue Service, raided Caterpillar Inc.’s Peoria, Illinois headquarters on Thursday, March 2.
Caterpillar spokeswoman Corrie Scott confirmed that “Law enforcement is present in various Peoria-area Caterpillar facilities executing a search warrant. Caterpillar is cooperating.”
The company, a leading manufacturer of construction and mining equipment, has been under investigation by the Internal Revenue Service for some time regarding its accounting practices. The IRS claims the publicly-held company owes more than $2 billion in back taxes.
According to The Peoria Journal Star, law enforcement agents wearing IRS logo jackets were witnessed going inside of the facility to carry out a search warrant.
In the wake of the raid, a law firm specializing in shareholder rights announced that it has filed a class action lawsuit on behalf of Caterpillar shareholders. The law firm of Bronstein, Gewirtz & Grossman, LLC, said in a press release that it is representing those who bought Caterpillar securities between 2013 and 2017. The boutique law firm describes its primary expertise as "the aggressive pursuit of litigation claims on behalf of our clients."
The suit alleges that Caterpillar made false and misleading statements to stockholders and that it failed to disclose adverse information about the business. Most significantly, the suit claims that Caterpillar unlawfully used foreign subsidiaries to avoid paying billions of dollars in U.S. taxes and that discovery of the practice was likely to subject the company to heightened regulatory scrutiny and potential criminal sanctions.
Specifically, the dispute centers around Caterpillar's assignment of some of the profit realized from its parts division to a Swiss subsidiary which does not transact any business in Switzerland.
PricewaterhouseCoopers ("PwC") was hired by Caterpillar to audit the company and devise its tax strategy. PwC may ultimately be part of the investigation and its executives are expected to testify at upcoming congressional hearings.
Caterpillar stock fell to $4.05 per share, or 4.11%, during intraday trading on March 2, 2017 after news of the raid broke.
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