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Caterpillar Is Accused in Report to Federal Investigators of Tax Fraud

For years, federal investigators have been scrutinizing Caterpillar's overseas tax affairs with no resolution to the examinations of the complex maneuvers involving billions of dollars and one of the company's Swiss subsidiaries.

Now, a report commissioned by the government and reviewed by The New York Times accuses the heavy-equipment maker of carrying out tax and accounting fraud. It is extremely rare to accuse a big multinational company of tax fraud, which could result in high penalties.

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"Caterpillar did not comply with either U.S. tax law or U.S. financial reporting rules," wrote Leslie A. Robinson, an accounting professor at the Tuck School of Business at Dartmouth College and the author of the report. "I believe that the company's noncompliance with these rules was deliberate and primarily with the intention of maintaining a higher share price. These actions were fraudulent rather than negligent."

No charges have been filed, and it is not clear whether investigators agree with the findings or intend to act on them. The report, which has not been made public or made available to Caterpillar, outlines a company strategy for bringing home billions of dollars from offshore affiliates while avoiding federal income taxes on those earnings.

Corrie Heck Scott, a Caterpillar spokeswoman, pointed out that the company had not been provided with a copy of the report and declined to comment further. The company, which makes heavy construction and mining equipment, has defended its tax strategies in previous years by calling the arrangements prudent and lawful among large United States companies.

Caterpillar's strategies for reducing the taxes it must pay in the United States have saved the company billions of dollars. Last week, federal agents raided three Caterpillar buildings near its headquarters in Peoria, Ill., as part of the investigation. Caterpillar said it was cooperating with law enforcement.

The company's tax practices have been a focus of government investigators since a 2014 Senate hearing found that the company cut its tax bill by $2.4 billion over 13 years, moving...


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