This Wednesday, Caterpillar’s shades fell 2% in pre-market trading, after the construction equipment manufacturer was accused by the government of tax and accounting fraud.
According to USA Today, Corrie Scott, one of the company’s spokespersons, declared that they weren’t given a copy of the report, therefore their decision to decline commenting on this is legit.
The same source mentions that law enforcement officials raided Caterpillar’s corporate headquarters, as well as their facilities in Peoria, Illinois, at the beginning of the month, in order to execute a search and seizure warrant.
The warrant is focused on the collection of documents and electronic information,” Caterpillar’s representatives said last week. “Caterpillar is cooperating with law enforcement.”
The shares, one of the 30 components of the Dow Jones Industrial Average, dropped with $2.13, reaching $93.80.
“Caterpillar did not comply with either U.S. tax law or U.S. financial reporting rules,” said Leslie Robinson, accounting professor at Dartmouth College, in the report, explaining the main reason of the accusations.
However, it’s still not clear which governmental agency commissioned the report, but Mrs. Robinson declared that the one she made was directly related to Caterpillar’s investigation conducted by the Federal Deposit Insurance Corporation Office of Inspector General.
As for the manufacturer’s point of view, they believe that the investigation’s main focus were the export filings involving Swiss subsidiary CSARL. Caterpillar’s annual report from 2014 disclosed the fact that the Securities and Exchange Commission had begun an informal investigation on this subsidiary, having sought preservation of related records.
Back in 2016, they updated the issue, declaring that CSARL accounted for a major amount of undistributed profits, from other, foreign subsidiaries that the company eventually determined to be reinvested outside the United States.