Caterpillar Accused Of Tax Fraud: Report To Feds

PEORIA, IL — A week after federal law enforcement raided its headquarters and two other Central Illinois facilities, a New York Times report reveals that a federally commissioned report levels tax fraud accusations against heavy equipment manufacturer Caterpillar.

In a report obtained this week by the New York Times, Dartmouth College accounting professor Leslie A. Robinson asserted, “Caterpillar did not comply with either U.S. tax law or U.S. financial reporting rules. 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.”

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

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

Caterpillar issued a statement saying it had not seen Robinson's report prior to its publication in the New York Times but was reviewing a copy it received on Thursday.

"We've been in business for almost 100 years. We are an honorable company — we live by our code of conduct and our values," the company said in a statement, saying it takes its obligation to pay taxes very seriously. "We disagree with the IRS' position ... and believe we are compliant with the tax laws."

No charges have been filed in connection with the accusations in the government-commissioned report or the March 2 raid on Caterpillar's facilities in Peoria, East Peoria and Morton.

The company has been under IRS scrutiny for years concerning its tax strategy involving CSARL. Last week, the company said it believed the searches by investigators from the IRS, 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 were connected to the Swiss branch.

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

In its report, the New York Times noted, "It is extremely rare to accuse a big multinational company of tax fraud, which could result in high penalties."

Patch photo by Patrick Martin