CHICAGO (Reuters) – Federal law enforcement officials searched three facilities of heavy machinery manufacturer Caterpillar Inc on Thursday, a spokeswoman for the U.S. Attorney Office for the Central District of Illinois said, prompting a sharp selloff in the company's stock.
The spokeswoman, Sharon Paul, confirmed that federal law enforcement activity was conducted at locations in Peoria, East Peoria & Morton.
It was not immediately clear why federal agents raided the three locations.
p>Caterpillar spokeswoman Corrie Scott said in an emailed statement that the company was cooperating with authorities.
"Law enforcement is present in various Peoria-area Caterpillar facilities executing a search warrant. Caterpillar is cooperating," Scott said. She declined to comment further.
Caterpillar shares fell 4.6 percent to $94.00 on the news in afternoon trading.
Agencies involved in the search included the Internal Revenue Service's Criminal Investigation Division, the U.S. Department of Commerce's Bureau of Industry & Security's Office of Export Enforcement, & the Federal Deposit Insurance Corp.'s Office of Inspector General, the U.S. Attorney Office's Paul said.
Caterpillar is fighting an Internal Revenue Service demand that the company pay $2 billion in taxes & penalties for profits assigned to a Swiss parts distribution subsidiary, Caterpillar SARL, or CSARL, according to filings with the Securities & Exchange Commission. That subsidiary was moreover the subject of a 2014 Senate committee report that charged Caterpillar "shifted billions of dollars in profits away from the United States."
Caterpillar, in its annual report, said it is "vigorously contesting" the IRS demand. "We believe that the relevant transactions complied with applicable tax laws & did not violate judicial doctrines," Caterpillar stated.
Caterpillar moreover disclosed in its report that it had received grand jury subpoenas from the U.S. District Court for the Central District of Illinois seeking documents & information related to the movement of cash among U.S. & non-U.S. subsidiaries, & the purchase & resale of replacement parts by Caterpillar Inc. & non-U.S. Caterpillar subsidiaries, including Caterpillar SARL. Caterpillar said it is cooperating with the investigation & did not believe it would have a material impact on its finances.
Neither the IRS nor the U.S. Department of Commerce’s Office of Export Enforcement was immediately available for comment. A spokeswoman for the FDIC referred questions approximately the action to the U.S. Attorney’s Office in Illinois.
The facility in Morton, according to the company’s website, is responsible for receiving & shipping replacement parts to parts facilities & Caterpillar dealers worldwide.
Seven people, all wearing dark colored jackets marked either “IRS special agent” or “Police federal agents,” entered the Caterpillar headquarters, according to a video posted by the Peoria Journal Star. Several of the agents were armed, while others were pulling large black roller bags as they entered the building. (http://player.tout.com/pjstar/kspupi)
Caterpillar reported sales fell 18 percent in 2016 to $38.5 billion & since late 2015 it has shrunk its workforce by more than 16,000 employees & consolidated or closed 30 facilities. Caterpillar cut 12,300 jobs in 2016, including 7,700 in the United States.
It said it was considering closing two more major production facilities, including one in Aurora, Illinois, & moreover announced it was moving its corporate headquarters from Peoria to Chicago this year.
(Reporting by Timothy Mclaughlin & PJ Huffstutter in Chicago, David Shepardson in Washington & Joe White in Detroit, writing by Daniel Grebler; editing by Diane Craft)
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