Caterpillar Goes From White House Kudos to Multi-Agency Raid

One week ago, Caterpillar Inc. was being praised by President Donald Trump for producing great bulldozers. “I love Caterpillar," Trump told company Chairman Doug Oberhelman at a meeting of manufacturing heads at the White House.

On Thursday, officials from the Commerce Department, Internal Revenue Service, Federal Deposit Insurance Corp. and Illinois State Police moved in and out of the company’s corporate headquarters in Peoria, Illinois, in a raid seeking evidence related to exports and a Swiss subsidiary as part of a criminal probe. read more »

Years of federal scrutiny lead to Caterpillar HQ raid

Years of federal scrutiny over Caterpillar's overseas business practices and tax strategies came to a head Thursday with a raid on the heavy machine maker's Peoria headquarters.

Authorities from three agencies, including the Internal Revenue Service, arrived before 11 a.m. at the headquarters and two nearby facilities. Initially only confirming the raid, Caterpillar later in the day acknowledged it was tied to the same issue that has dogged the company for eight years: its use of a parts subsidiary based in Switzerland and tax-saving practices that sparked a Senate investigation, shareholder lawsuits and a $1 billion penalty.

In 2014, a Senate investigation found the company had used its Swiss affiliate to take advantage of a corporate tax rate it negotiated and avoided paying at least $2.4 billion in U.S. taxes. Soon after, shareholders filed lawsuits against the company and its accounting firm, PwC, alleging breach of fiduciary duties. That matter is ongoing. read more »                            

Cognizant incurs $27m in cost on India corruption probe

US-based Cognizant incurred USD 27 million in costs related to its investigation into potential "improper payments" made in India and related lawsuits last year and expects the expenses to continue this year as well.

In September 2016, Cognizant had disclosed that it had discovered violations of the US Foreign Corrupt Practices Act.

To date, the investigation has identified a total of about USD 6 million in payments made between 2010 and 2015 in "potentially improper payments" for company-owned facilities in India.

"In 2016, we incurred USD27 million in costs related to the FCPA investigation and related lawsuits. We expect to continue to incur expenses related to these matters in 2017 and future periods," Cognizant said in a filing to the US SEC.

Since the disclosure, three putative securities class action complaints have been filed in a US District Court seeking awards of compensatory damages, among other relief, and their costs and attorneys' and experts' fees. read more »

Whistleblower Loses Out on $864M Moody’s Ratings Settlement

A federal judge on Thursday dismissed a whistleblower lawsuit by a former Moody’s Investors Service managing director and said he deserves none of the $863.8 million that Moody’s agreed to pay to settle claims it inflated mortgage ratings prior to the 2008 financial crisis.

U.S. District Judge William Pauley said Ilya Eric Kolchinsky could not show that the Moody’s Corp. unit violated the federal False Claims Act, given how the government kept paying for its ratings even after learning they might be compromised.

The Manhattan judge said this barred Kolchinsky from sharing in Moody’s Jan 13 settlement with the U.S. Department of Justice and the attorneys general of 21 states and the District of Columbia, though the terms left open that prospect.

“This court acknowledges that this a harsh result,” Pauley wrote. “Kolchinsky provided enormously helpful information to various congressional committees and government investigators.”

Star-studded legal team will seek to save Samsung chief

Samsung chief Jay Y. Lee has handpicked 13 top lawyers to defend him against charges of bribing the South Korean president, nearly all of them former judges or prosecutors, according to the court where one of the richest men in the country will be tried.

Lee, 48, was indicted by a special prosecutor's office on Feb. 28 on charges of bribery and embezzlement over his alleged role in the corruption scandal involving impeached President Park Geun-hye. Four other Samsung executives have also been charged, a massive blow for the world's biggest maker of smartphones and memory chips.

Described as the "trial of the century", court proceedings begin on March 9, and if convicted, Lee could face more than 20 years in prison. A verdict has to be delivered within three months. read more »

Ex-J.P. Morgan Employee Pleads Guilty to Stealing $5 Million to Pay Off Personal Debt

A former J.P. Morgan Chase employee who has been ordered to attend counseling for gambling has pleaded guilty to criminal charges that he stole more than $5 million from his employer to pay personal debts, New York prosecutors said.

Lawrence Obracanik, 42, pleaded guilty to wire fraud affecting a financial institution on Thursday before U.S. District Judge Ronnie Abrams in Manhattan, according to an announcement from U.S. Attorney Preet Bharara. read more »

Morgan Stanley Goofed on Tax Information. But Not to Worry.

Some Morgan Stanley wealth management customers are getting news in the mail this week: They underpaid — or in some cases, overpaid — their taxes for several years because of incorrect information the firm provided to them about their investments.

Morgan Stanley disclosed in a regulatory filing this week that it had provided a “significant number” of retail brokerage clients, as well as the Internal Revenue Service, with inaccurate information on the cost basis of their investments. The basis is used to calculate the gain or loss when a security is sold, which determines how much tax is owed.

Morgan Stanley said in its filing that the errors were caused by “operational issues” and affected tax years 2011 through 2016. In the tax year 2011, the I.R.S. began requiring brokers to report more detailed cost-basis information. The information typically is reported to investors on Form 1099-B. read more »

Jury acquits Utah AG John Swallow of all charges

Tears streamed down John Swallow's face as a jury acquitted him of public corruption charges Thursday, ending perhaps the most unprecedented criminal case involving a politician in Utah history.

Prosecutors alleged that Swallow was part of a conspiracy with former Attorney General Mark Shurtleff and the late Tim Lawson to extort money and favors from Jenson, a wealthy businessman who had reached a plea-in-abeyance deal with the attorney general’s office. Jenson paid for the three men to visit the posh Pelican Hill resort in Southern California where he lived.

"It’s the power. It’s the greed. It is corruption. That’s what happened," deputy Salt Lake County district attorney Chou Chou Collins told jurors in closing arguments.

Shurtleff was the lead, Lawson the muscle and Swallow the money man to further their political and financial aspirations, prosecutors alleged.

Prosecutors also said Swallow illegally accepted the use of a houseboat, lied in a deposition and an FBI interview, omitted financial information from a candidate declaration form and had the state pay for a broken screen on his personal laptop. They also say he took a bribe through a campaign fundraiser held by a couple who had filed a mortgage foreclosure lawsuit against Bank of America in which the attorney general's office intervened.

Swallow faced nine charges: pattern of unlawful activity, accepting a gift, two counts of receiving or soliciting a bribe, and making false statements, all second-degree felonies; evidence tampering, misuse of public money and obstruction of justice, all third-degree felonies; and falsifying a government record, a class B misdemeanor. read more »