An accountant employed by US equipment maker Caterpillar may be eligible for a $600m reward after he informed the Internal Revenue Service (IRS) that the company had been attributing profit to its Swiss subsidiary and paying less tax on it that it would have in the US.
If the case is resolved in his favour, he could become the best paid whistleblower in history.
Daniel Schlicksup notified authorities of his concerns in 2013 after first trying to bring them to the notice of Caterpillar’s management. This led to an investigation by a number of federal authorities, hearings in the US senate and, in March this year, a raid on the company’s headquarters in Peoria, Illinois by agents of the IRS, the Department of Commerce and the Federal Deposit Insurance Corporation.
The senate hearing concluded that Caterpillar had avoided paying tax on as much as $8bn in revenue, and the IRS is claiming some $2bn in back tax. For its part, Caterpillar is maintaining that its conduct was within the law, and says it is "in the process of responding to the government’s concern".
Schlicksup, who joined Caterpillar as an accountant in 1992, objected to a scheme whereby Caterpillar attributed 85% of the profit it made on replacement parts to its Geneva subsidiary, where it had negotiated a tax rate of 4-6%, compared with just under 30% in the US. Caterpillar did not have any factories or warehouses in Switzerland.
A detailed account of Schlicksup’s attempts to warn Caterpillar that he believed its conduct broke US tax rules, and the response of various executives to those concerns, is detailed in a feature article in Bloomberg.
Schlicksup filed an IRS complaint in 2009, and later brought a lawsuit against Caterpillar accusing it of retaliating against him – illegal under US law. According to an affidavit that Schlicksup presented in his retaliation case, he was prohibited from bringing his laptop to meetings and had to obtain written approval to eat lunch outside the building.
According to Bloomberg, Schlicksup ended up consulting three doctors and a physical therapist for stress. "My career has been taken from me," he told a Caterpillar lawyer in a deposition. "I want my job back in tax."
If the case is resolved in favour of the IRS, then Schlicksup, 55, could become the best paid whistleblower in history, with a reward of between $300m and $600m, depending on how useful his information was to the IRS. The previous holder of the title was Bradley Birkenfeld, an employee of banking group UBS, who received $104m after he told the IRS how his employer had helped US citizens to evade taxes.
Caterpillar is the largest maker of construction machinery in the world, and is the 54th largest company in America.
Image: Caterpillar is a global brand (YouTube)