In March of this year, The New York Times reported that a report commissioned by the government accused heavy equipment manufacturer Caterpillar of carrying out tax and accounting fraud. According to the Times, the report outlined a company strategy for repatriating billions of dollars from its offshore affiliates while evading federal income taxes on those earnings.https://www.nytimes.com/2017/03/07/business/caterpillar-tax-fraud.html .The investigation resulted in Caterpillar’s offices being raided in March by various US Government agencies and the company has since disclosed in its securities filings that the IRS is seeking more than $2 billion in income taxes and penalties on profits earned by the company’s Swiss unit.
Under U.S. tax laws, companies owe corporate income taxes at a rate of 35 percent on profits earned around the world but are permitted to defer taxes on profits made offshore until they seek to bring those earnings back into the states—known as repatriation. Once the funds are brought back, they owe the IRS the taxes minus what they paid when the funds were overseas. The story reached a new chapter in June this year, with the Fortune Magazine reported that the feds had determined that Caterpillar had failed to submit a load of required documents relating to exports in recent years and also unveiled discrepancies between the company’s ordinary filings and what it submitted to authorities in response to subpoenas. http://fortune.com/2017/07/03/the-irs-thinks-its-on-to-something-in-its-caterpillar-probe/
A former Caterpillar accountant by the name of Daniel Schlicksup, who had worked for the company for 16 years, tried without success to tell his company that it was engaged in practices that was not legal. Then, he says he came under retaliation and wrote a 15 page memo on how that happened, according to an article in Bloomberg News. https://www.bloomberg.com/news/features/2017-06-01/the-whistleblower-behind-caterpillar-s-massive-tax-headache-could-make-600-million Aided by Mr. Schlicksup’s memo, the IRS began to dig. Schliscksup, 55, left the company but if the IRS collects what it says Caterpillar owes he could receive a reward of $600 million in line with the IRS whistleblower program. In 2012, a Senate committee examined the company’s taxes. In a 95-page report which mentions Schlicksup prominently, they concluded that Caterpillar avoided or deferred $2.4 billion in taxes. Now Mr. Schlicksup could receive one of the highest whistleblower awards ever.