Caterpillar CEO Apologizes to Employees After IRS Raid

PEORIA, IL -- After federal law enforcement agents raided three of its facilities on Thursday — possibly due to a tax strategy that shifts billions of dollars in profits to a subsidiary in Switzerland — Peoria-based Caterpillar apologized to its staff.

In a memo to employees obtained by the Peoria Journal Star, CEO Jim Umpleby said, " I'm sorry that we had to experience this today." Umpleby added he believes the raids at the company's Peoria, East Peoria and Morton facilities are "connected in part to a previous matter related to our Switzerland-based subsidiary, CSARL, that has been under review for more than three years."

» Feds Raid Caterpillar: Search May Be Linked to Swiss Subsidiary

In 2014, Caterpillar company reps were called to testify before a U.S. Senate subcommittee about a tax strategy that shifted profits to Switzerland, according to Crain's. The subcommittee's findings (below) stated that Caterpillar "shifted billions of dollars in profits away from the United States and into Switzerland."

The company is fighting an IRS demand that it pay $2 billion in taxes and penalties for shifting profits to a Swiss subsidiary known as Caterpillar SARL, or CSARL, Reuters reported.

On Thursday, Caterpillar officials said agents were searching for documents and electronic information as part of a raid conducted by the Internal Revenue Service criminal investigations unit, the inspector general's office for the Federal Deposit Insurance Corp. and the Department of Commerce's Bureau of Industry and Security Office of Export Enforcement.

Umpleby's statement said the company did not have enough information to say exactly what agents were looking to find. Authorities also have revealed what specifically the raid was targeting.

"We were surprised by today's actions primarily because we have been so cooperative with the authorities in this investigation," Umpleby told employees. "We have acted in good faith and as a good corporate citizen."

Photo: Caterpillar's Montgomery-area facilities/Patrick Martin (Patch staff)