Feds Raid Caterpillar: Search May Be Linked to Swiss Subsidiary

PEORIA, IL — Federal officials were searching Caterpillar offices including its corporate headquarters in Peoria Thursday, according to a report from the Peoria Journal Star. The company said it believes the raid is related to its subsidiary in Switzerland.

Caterpillar said in a statement that it is cooperating with law enforcement and a search and seizure warrant "focused on the collection of documents and electronic information." The heavy equipment manufacturer said while the warrant is "broadly drafted, we believe the execution of this search warrant is regarding, among other things, export filings that relate to the CSARL matter first disclosed in Caterpillar’s Form 10-K filed on Feb. 17, 2015."

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.

Three years ago, 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, where Caterpillar had negotiated an effective corporate tax rate of 4 percent to 6 percent."

Since news of the raid broke Thursday morning, the company's stock has dropped nearly 5 percent, according to Bloomberg.

The office of the U.S. Attorney for the Central District of Illinois confirmed that law enforcement was searching offices in Peoria, East Peoria and logistics facilities in Morton but released no details on what authorities are looking for or why they were conducting the raids.

A spokeswoman for the U.S. Attorney's Office told Crain's the raid is being 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.

The search comes as the company plans to move its corporate headquarters away from Peoria and relocate 300 of its employees.

While authorities did not immediately disclose details of the raid, NBC affiliate WEEK reported receiving photos of law enforcement wearing IRS jackets entering Caterpillar's headquarters. CNBC reported officials from the IRS, FDIC and Commerce Department were combing the facilities for tax documents, and employees were asked to leave the building:

Photo by Patrick Martin (Patch Staff)

This is a developing story. Check back for updates.