{"id":44766,"date":"2024-03-10T03:43:51","date_gmt":"2024-03-10T03:43:51","guid":{"rendered":"https:\/\/manitimes.com\/how-trumps-justice-dept-derailed-an-investigation-of-a-major-company\/"},"modified":"2024-03-10T03:43:51","modified_gmt":"2024-03-10T03:43:51","slug":"how-trumps-justice-dept-derailed-an-investigation-of-a-major-company","status":"publish","type":"post","link":"https:\/\/manitimes.com\/how-trumps-justice-dept-derailed-an-investigation-of-a-major-company\/","title":{"rendered":"How Trump\u2019s Justice Dept. Derailed an Investigation of a Major Company"},"content":{"rendered":"
In December 2018, a team of federal law enforcement agents flew to Amsterdam to interview a witness in a yearslong criminal investigation into Caterpillar, which had avoided billions of dollars of income taxes by shifting profits to a Swiss subsidiary.<\/p>\n
A few hours before the interview was set to begin, the agents were startled to hear that the Justice Department was telling them to cancel the long-planned meeting.<\/p>\n
The interview was never rescheduled, and the investigation would limp along for another few years before culminating, in late 2022, with a victory for Caterpillar. The Internal Revenue Service told the giant industrial company to pay less than a quarter of the back taxes the government once claimed that Caterpillar owed and did not impose any penalties. The criminal investigation was closed without charges being filed \u2014 and even without agents having the chance to review records seized from the company.<\/p>\n
Caterpillar appears to have defused the investigation at least in part by deploying a type of raw legal power that rarely becomes publicly visible. This account is based on interviews with people familiar with the investigation, regulatory filings and internal Justice Department emails provided to Senate investigators and reviewed by The New York Times.<\/p>\n<\/div>\n<\/div>\n
In the months leading up to the canceled interview in the Netherlands, Caterpillar had enlisted a small group of well-connected lawyers to plead the company\u2019s case. Chief among those was William P. Barr, who had served as attorney general in the George H.W. Bush administration.<\/p>\n<\/div>\n<\/div>\n
Caterpillar\u2019s attorneys met with senior federal officials, including the Justice Department\u2019s top tax official, Richard Zuckerman, according to agency emails. The lawyers sharply criticized the conduct of one of the agents working on the Caterpillar case and questioned the legal basis for the investigation.<\/p>\n
A week before the agents were to interview the witness in the Netherlands, President Donald J. Trump nominated Mr. Barr to return to the Justice Department as the next attorney general. Mr. Zuckerman then ordered the interview to be canceled and the inquiry halted, without getting input from the prosecutor overseeing the Caterpillar investigation, according to the emails.<\/p>\n
The sequence of events alarmed some federal officials and set off calls for an internal investigation.<\/p>\n<\/div>\n<\/div>\n
\u201cIt appears that Caterpillar was given special political treatment that the average U.S. citizen cannot obtain,\u201d Jason LeBeau, one of the agents who worked on the investigation, wrote to the Justice Department\u2019s inspector general late last year.<\/p>\n
Justice Department and I.R.S. representatives declined to comment.<\/p>\n<\/div>\n<\/div>\n
\u201cCaterpillar cooperated with the government in its review of the issues, and we were pleased to have reached the resolution with the I.R.S.,\u201d said Joan Cetera, a spokeswoman for the company.<\/p>\n
The roots of the investigation into Caterpillar, which makes trucks, asphalt pavers and a variety of industrial parts and equipment, dated back to 2009, when a former employee filed an I.R.S. whistle-blower claim asserting that Caterpillar had fraudulently dodged billions of dollars in U.S. income taxes by improperly parking profits in a small Swiss subsidiary.<\/p>\n
The I.R.S. later accused Caterpillar of using \u201can abusive tax shelter\u201d to understate its profits in the United States by $3 billion. A Senate committee also dug into the tax strategy, unearthing internal communications and interviewing Caterpillar\u2019s employees and outside advisers, and raised questions about its legality.<\/p>\n<\/div>\n<\/div>\n
That piqued the interest of the U.S. attorney near Caterpillar\u2019s headquarters in Peoria, Ill. A veteran prosecutor, Eugene Miller, was assigned to the case. He worked with agents from the I.R.S. and the Federal Deposit Insurance Corporation\u2019s Office of Inspector General, including Mr. LeBeau. (The F.D.I.C. office investigates bank and securities fraud.) Mr. Miller soon convened a grand jury and began issuing subpoenas.<\/p>\n
Investigations of corporate tax dodges are generally civil, not criminal. This was a rare exception, indicating that the federal authorities believed that Caterpillar might have engaged in deliberate wrongdoing. (The I.R.S., too, sought the Justice Department\u2019s approval to open a criminal investigation, though it is not clear whether the agency got that clearance.)<\/p>\n
\u201cI suspect this is one of the bigger paper cases you (we) will ever do,\u201d the head of the F.D.I.C. inspector general\u2019s office emailed Mr. LeBeau in 2016. \u201cIt\u2019s a great case.\u201d<\/p>\n
In early 2017, federal agents searched and seized records from several Caterpillar buildings in and around Peoria as part of the investigation.<\/p>\n
Two weeks later, the company announced that it was hiring some Washington heavy hitters for help. Mr. Barr was one. He was joined by James Cole, who had been the No. 2 official in the Obama Justice Department.<\/p>\n<\/div>\n<\/div>\n
By early 2018, the I.R.S. had informed Caterpillar that the agency was seeking taxes and penalties totaling $2.3 billion. The U.S. attorney\u2019s criminal investigation was also moving ahead.<\/p>\n
Mr. Barr and his colleagues met with Mr. Miller\u2019s boss, the U.S. attorney for the central district of Illinois, and asked him to end the investigation.<\/p>\n<\/div>\n<\/div>\n
In May 2018, Mr. Barr escalated the matter. He and Mr. Cole sent a 28-page letter to Mr. Zuckerman, the Justice Department\u2019s top tax official, and the deputy attorney general, Rod Rosenstein.<\/p>\n
The letter argued that the investigation violated a requirement that federal criminal tax investigations be approved by the Justice Department\u2019s tax division. And it took particular aim at Mr. LeBeau, saying he had a \u201cbasic misunderstanding of the relevant tax rules\u201d and was pursuing a \u201cconspiracy theory.\u201d The attacks were an unusual effort to undermine the credibility of an individual investigator.<\/p>\n<\/div>\n<\/div>\n
To press Caterpillar\u2019s case, Mr. Cole met several times with Mr. Zuckerman. Whereas Mr. Cole was a powerhouse lawyer in Washington, Mr. Zuckerman had only recently moved to the capital from Michigan to join the Justice Department.<\/p>\n
Mr. Zuckerman was not a tax specialist. He had worked for years at a Detroit law firm, where his expertise was defending companies and executives. Before that, he had been a prosecutor and in the late 1970s helped investigate the disappearance of the Teamsters boss Jimmy Hoffa.<\/p>\n
Despite the pressure from Mr. Barr and Mr. Cole, the investigation continued. Mr. LeBeau and others traveled the world to interview former Caterpillar employees.<\/p>\n