CAT stock was off 5% amid reports that Federal officials had raided three different corporate locations in Illinois. Caterpillar shares had been rangebound until the news.
The locations have been confirmed by Sharon Paul — a spokesperson for the U.S. Attorney’s Office for the Central District of Illinois — as Peoria, East Peoria and Morton. Corrie Scott, a spokesperson for Caterpillar, only gave a brief statement on the matter:
“Law enforcement is present in various Peoria-area Caterpillar facilities executing a search warrant. Caterpillar is cooperating.”
According to the Peoria Journal Star, the investigation is in regards to a lawsuit initiated by Daniel Schlicksup, a former Caterpillar employee, as the suit alleges CAT dodged taxes by moving its profits to several offshore shell companies.
Caterpillar acknowledged this investigation in its latest annual filing:
“On January 8, 2015, the Company received a grand jury subpoena from the U.S. District Court for the Central District of Illinois. The subpoena requests documents and information from the Company relating to, among other things, financial information concerning U.S. and non-U.S. Caterpillar subsidiaries (including undistributed profits of non-U.S. subsidiaries and the movement of cash among U.S. and non-U.S. subsidiaries). The Company has received additional subpoenas relating to this investigation requesting additional documents and information relating to, among other things, the purchase and resale of replacement parts by Caterpillar Inc. and non-U.S. Caterpillar subsidiaries, dividend distributions of certain non-U.S. Caterpillar subsidiaries, and Caterpillar SARL and related structures. The Company is cooperating with this investigation.”
The federal agents seem to be executing different strategies at the various Caterpillar locations. In Caterpillar’s downtown global headquarters, the Journal Star details employees, mostly from accounting, being held in the cafeteria, while in East Peoria, agents are doing more of a digital scrub, procuring emails and other electronic communications.
According to the Journal Star, the agents were spotted wearing jackets emblazoned with the IRS logo and others with identifiers of the Federal Deposit Insurance Corporation.
Thanks to Thursday’s sudden drop, CAT stock is now close to breakeven for the year-to-date.
As of this writing, John Kilhefner did not hold a position in any of the aforementioned securities.