March 21--PEORIA -- Caterpillar Inc. CEO Jim Umpleby highlighted William Barr's independence from the company in announcing last week that the former U.S. attorney general had been retained after federal agents executed search warrants at Cat's headquarters.
But the same can't be said for the law firm where Barr now works -- Kirkland & Ellis LLP -- which played a role in the whistleblower lawsuit that first brought Caterpillar's embattled tax strategy into public view.
The global firm with more than 1,700 attorneys has deep ties to PricewaterhouseCoopers, now known as PwC, the accounting and consulting firm that has been Caterpillar's external auditor for decades and was paid $55 million to develop and implement Cat's tax strategy.
Javier Rubenstein, the former vice chairman and international global counsel for PwC, joined Kirkland & Ellis in October 2016.
"I have asked (Barr) -- who has no prior connection with Caterpillar -- to draw on his experience and that of his colleagues at Kirkland & Ellis and other advisers, to take a fresh look at Caterpillar's disputes with the government, get all the facts, and then help us bring these matters to proper resolution based on the merits," Umpleby said in a statement released Thursday.
A company spokesperson on Monday reiterated that the "no prior connection with Caterpillar" language in the statement applied only to Barr's previous involvement with the company.
Kirkland & Ellis attorney Mark Nomellini from the firm's Chicago office entered an appearance on behalf of PwC in an employment lawsuit brought against Caterpillar in 2009 by the equipment maker's former global tax strategy manager, Daniel Schlicksup.
Schlicksup alleged Caterpillar retaliated against him for raising legal and ethical concerns about the company's use of Swiss subsidiary Caterpillar SARL and other offshore subsidiaries to avoid paying U.S. federal income taxes -- tax structures developed by PwC. Schlicksup additionally alleged improper payments to PwC and conflicts of interest in the relationship between Caterpillar and PwC.
PwC was not a defendant in the Schlicksup lawsuit, which was dismissed in 2012. The accounting firm entered the case represented by Kirkland & Ellis in a partly successful attempt to quash subpoenas that sought communications between Caterpillar and PwC.
Schlicksup's lawsuit ultimately created a public blueprint of Caterpillar's tax strategy that resulted in vast federal investigations. A U.S. Senate Permanent Subcommittee on Investigations report in 2014 found Caterpillar avoided paying $2.4 billion in U.S. federal income taxes over 13 years through the Swiss subsidiary.
The Internal Revenue Service has since proposed more than $2 billion in back taxes and penalties, a finding that Caterpillar continues to contest.
A criminal investigation apparently related to Caterpillar's Swiss subsidiary was the subject of a federal grand jury in the Central District of Illinois by at least Jan. 8, 2015, when Caterpillar received the first round of subpoenas.
The company confirmed on Monday that it hired outside counsel to coordinate its responses to those and subsequent subpoenas as a standard corporate practice, but would not identify which firm or firms were hired.
The search warrants executed March 2 at Caterpillar's headquarters, its data center in East Peoria and the worldwide logistics center in Morton sought evidence of violations of export laws and false financial statements or reports -- with specific mention of Caterpillar SARL.
Future responses to the investigation are now in the hands of Barr, who served as U.S. attorney general from 1991 to 1993 under President George H.W. Bush, and Kirkland & Ellis.
Matt Buedel can be reached at 686-3154 or [email protected] Follow him on Twitter @JournoBuedel.
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