On March 2, agents from the Commerce Department's Office of Export Enforcement, the IRS's criminal division and the Federal Deposit Insurance Corp.'s inspector general's office raided Caterpillar's headquarters in Peoria, Ill., its parts warehouse in nearby Morton and a data center. Caterpillar has since moved its headquarters to Deerfield, Ill., a suburb of Chicago.
The searches lasted all night and into the next day. Agents were looking for information related to export data Caterpillar is required to submit to the government when it ships outside the U.S.
People familiar with the matter say investigators identified before the raid numerous instances in which they believe Caterpillar might have failed to file the required data. Search warrants reviewed by the Journal indicate the raid was focused largely on the Swiss unit.
Agents also seized documents from PwC's work site at the former headquarters in Peoria, according to a person familiar with the situation.
"I'm sorry that we had to experience this today," Mr. Umpleby, Caterpillar's chief executive, said in an internal memo to employees. He called Caterpillar an "honorable company."
As part of its investigation, the FDIC's inspector general commissioned a report by Dartmouth College professor Leslie Robinson, who concluded Caterpillar had engaged in tax and accounting fraud, according to a person familiar with the report. It hasn't been publicly released.
The report was based on publicly available financial information and nonpublic wire transfers, and it examined whether Caterpillar restructured Swiss cash into loans between its foreign subsidiaries and U.S. operations to offset a cash-flow deficit in the U.S., the person familiar with the report says.
Caterpillar wouldn't comment on the report but has privately criticized its assumptions and conclusions, according to people familiar with the matter. Caterpillar also has hired Obama administration tax official Stephen Shay and at least one other expert to defend the company's position.
The Dartmouth professor "misunderstands some amazingly basic things," says one of those people familiar with the company's opinion. A spokesman for the FDIC's inspector general's office referred questions to a spokeswoman for the U.S. attorney's office in Springfield, Ill. She declined to comment.
An analysis of securities filings by the Journal shows that manufacturing operations at Caterpillar sometimes have been boosted by loans from the company's financial unit.
Such loans increased cash flow in Caterpillar's heavy-machinery business in seven of the 14 years from 1998 to 2011. The Journal's analysis is consistent with the Dartmouth professor's findings, according to the person familiar with the report.
The federal government hasn't examined the full trove of data and documents agents seized in March because Caterpillar has argued that many of the materials are subject to attorney-client privilege, according to people familiar with the investigation.
--Richard Rubin and Aruna Viswanatha contributed to this article.
(END) Dow Jones Newswires
January 01, 2018 14:37 ET (19:37 GMT)