(Reuters) - Caterpillar Inc's shares gained on Friday, the day after U.S. law enforcement officials raided three of the company's Illinois facilities, as the Trump administration promised stricter scrutiny of multinationals' import and export practices.þþU.S. Secretary of Commerce Wilbur Ross said on Friday that the raids at the heavy equipment manufacturer were part of an ongoing probe.þþÿThe Commerce Department has enforcement responsibilities both on imports and on exports, so it's an important part of our function,ÿ Ross said on CNBC. ÿWe're going to be even stricter on enforcement, particularly on inbound goods that shouldn't be.ÿþþOne of the locations raided, in Morton, Illinois, is the central point for receiving and shipping after-market parts worldwide, according to Caterpillar's website.þþThe company's shares, part of the Dow Jones Industrial Average, were up 0.8 percent at $95.12 in morning trading. They had fallen 4.3 percent on Thursday, wiping out about $2.5 billion of market value and dragging on U.S. equities.þþChief Executive Officer Jim Umpleby said in a statement to employees seen by newspaper Peoria Star that management did not have enough information to provide a full understanding of the authorities' intent.þþÿThis morning, a number of our colleagues in the Peoria area were surprised when federal authorities arrived to execute a search warrant,ÿ the Thursday statement said. ÿI'm sorry that we had to experience this today.ÿþþThe scrutiny of the huge multinational company's tax practices is an early test of Umpleby, who took over as CEO at the start of the year.þþIn January, Caterpillar said it would move about 300 senior executives and staff to Chicago, starting this year. The company cited recruiting and access to global transportation as factors in the decision.þþThe apparent escalation of the government's tax dispute with Caterpillar comes amid the Trump administration's promise to reform corporate taxes and design a system that encourages companies to keep jobs and profits within the United States.þþCaterpillar said it believed the search was part of an Internal Revenue Service investigation of profits earned by Swiss parts subsidiary Caterpillar SARL, or CSARL.þþThat subsidiary was the subject of a 2014 Senate committee report that concluded Caterpillar shifted billions in profits abroad and had deferred or avoided paying $2.4 billion in taxes from 2012. The report criticized Caterpillar's accountants, PricewaterhouseCoopers, saying its dual roles as auditor and tax consultant represented a conflict of interest.þþCaterpillar is contesting an Internal Revenue Service demand that it pay $2 billion in taxes and penalties for profits assigned to the subsidiary between 2007 and 2012.þþCaterpillar's current exposure could rise to $3 billion since the company has continued to file tax returns on the same basis, Morningstar analyst Keith Schoonmaker said.þþÿWe suspect the core of the matter is not 'new' news, but rather that it relates to the risk already disclosed in 2014-16,ÿ said Schoonmaker, who lowered his fair value estimate on the stock to $64 from $67.þþ(Reporting by Narottam Medhora in Bengaluru; Writing by Nick Zieminski; Editing by Sayantani Ghosh and Lisa Von Ahn)
Source: NY Times
