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How Trump’s Justice Dept. Derailed an Investigation of a Major Company

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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.

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.

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 — and even without agents having the chance to review records seized from the company.

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.

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’s case. Chief among those was William P. Barr, who had served as attorney general in the George H.W. Bush administration.

Caterpillar’s attorneys met with senior federal officials, including the Justice Department’s 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.

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.

The sequence of events alarmed some federal officials and set off calls for an internal investigation.

“It appears that Caterpillar was given special political treatment that the average U.S. citizen cannot obtain,” Jason LeBeau, one of the agents who worked on the investigation, wrote to the Justice Department’s inspector general late last year.

Justice Department and I.R.S. representatives declined to comment.

“Caterpillar cooperated with the government in its review of the issues, and we were pleased to have reached the resolution with the I.R.S.,” said Joan Cetera, a spokeswoman for the company.

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.

The I.R.S. later accused Caterpillar of using “an abusive tax shelter” 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’s employees and outside advisers, and raised questions about its legality.

That piqued the interest of the U.S. attorney near Caterpillar’s 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’s 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.

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’s approval to open a criminal investigation, though it is not clear whether the agency got that clearance.)

“I suspect this is one of the bigger paper cases you (we) will ever do,” the head of the F.D.I.C. inspector general’s office emailed Mr. LeBeau in 2016. “It’s a great case.”

In early 2017, federal agents searched and seized records from several Caterpillar buildings in and around Peoria as part of the investigation.

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.

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’s criminal investigation was also moving ahead.

Mr. Barr and his colleagues met with Mr. Miller’s boss, the U.S. attorney for the central district of Illinois, and asked him to end the investigation.

In May 2018, Mr. Barr escalated the matter. He and Mr. Cole sent a 28-page letter to Mr. Zuckerman, the Justice Department’s top tax official, and the deputy attorney general, Rod Rosenstein.

The letter argued that the investigation violated a requirement that federal criminal tax investigations be approved by the Justice Department’s tax division. And it took particular aim at Mr. LeBeau, saying he had a “basic misunderstanding of the relevant tax rules” and was pursuing a “conspiracy theory.” The attacks were an unusual effort to undermine the credibility of an individual investigator.

To press Caterpillar’s 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.

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.

Despite the pressure from Mr. Barr and Mr. Cole, the investigation continued. Mr. LeBeau and others traveled the world to interview former Caterpillar employees.

Then, on Dec. 6, 2018, word leaked that Mr. Trump was poised to nominate Mr. Barr to succeed Jeff Sessions as attorney general. The news quickly spread through the Justice Department.

That afternoon, a lawyer in the tax division wrote to Mr. Miller, the federal prosecutor in Illinois, to ask about the extent of Caterpillar’s objections to the ongoing investigation. Mr. Miller responded that he knew of several instances of the company’s representatives protesting. He also asked what steps would be taken to wall off Mr. Barr from the investigation.

Five days later, internal emails show, Mr. Zuckerman contacted the U.S. attorney in the central district of Illinois. Mr. Zuckerman directed him not to conduct any further investigation into Caterpillar. The U.S. attorney relayed the order to Mr. Miller.

Mr. Miller was surprised. He still had not briefed Mr. Zuckerman on the investigation. Yet he was now halting the probe after recently meeting with Caterpillar’s lawyer, Mr. Cole, according to Justice Department emails.

“I wanted to confirm the direction we just received from your office,” Mr. Miller wrote to two Justice Department tax officials. Agents had already landed in the Netherlands, and two more were about to board a flight to join them. The interview with a former Caterpillar manager was due to start in 16 hours. Canceling at the last minute “may compromise our ability” to ever interview the former manager, Mr. Miller wrote.

Mr. Miller made a plea for an explanation about why the investigation was being paused. “Perhaps if we understood the underlying reasoning, we could address those concerns and still conduct the interview,” which had taken months to arrange, he wrote.

Kevin Sweeney, who spent six years in the Justice Department’s tax division, said in a recent interview that the situation sounded “very unusual” based on The Times’ description. “I would not expect the tax division to stop an investigation based on representations made by defense counsel without first having a discussion with the lead prosecutor,” he said.

Two hours after Mr. Miller sent the email, he got a response: Senior Justice Department officials had decided “that no further action,” including the planned interview, should be taken “until further notice.” (That direction was reported by Reuters in 2020.)

The agents were at a holiday party hosted by the U.S. ambassador to the Netherlands when they got a call telling them to stand down.

In early 2019, Mr. Barr’s nomination was up for Senate confirmation. He told senators that he would abide by the Justice Department’s ethics rules regarding recusing himself from matters involving clients like Caterpillar.

Shortly after the Senate voted to confirm Mr. Barr, Mr. Miller proposed to officials in Washington that the investigation be restarted. In April, he was told to hold off, an email shows.

Judith Friedman, a Justice Department lawyer who had helped arrange the canceled interview in the Netherlands, was disturbed. “I am very concerned about this case and would like to be assured that there is no political interference going on,” she wrote to a law enforcement colleague that month in an email reviewed by The Times. She suggested that someone notify the inspector general, who can field complaints about internal misconduct.

In September 2022, Caterpillar reached a settlement with the I.R.S., which assessed $490 million in taxes over a 10-year period, plus $250 million in interest. It was a fraction of the more than $2 billion in taxes that the agency previously said Caterpillar owed. (The $490 million included other issues in addition to the Swiss strategy at the heart of the investigation.) The company noted at the time that it “vigorously contested” the I.R.S.’s interpretation of the tax rules at issue.

After the Biden administration took over in 2021, the Justice Department still didn’t pursue the investigation. At the end of 2022, the department’s tax division informed Caterpillar “that it does not have a pending criminal tax matter,” according to a securities filing. Last year, the government began returning the materials that agents had seized in the 2017 raids.

In his letter to the Justice Department’s inspector general, Mr. LeBeau said that investigators had not even been allowed to review most of the seized records, which he said was “completely unprecedented” in his 22-year career.

Glenn Thrush contributed reporting. Kitty Bennett contributed research.

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Economics

ECB members say inflation job nearly done but tariff risks loom

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Guests and attendeess mingle and walk through the atrium during the IMF/World Bank Group Spring Meetings at the IMF headquarters in Washington, DC, on April 24, 2025.

Jim Watson | Afp | Getty Images

After years dominated by the pandemic, supply chains, energy and inflation, there was a new topic topping the agenda at the World Bank and International Monetary Fund’s Spring Meetings this year: tariffs.

The IMF set the tone by kicking off the week with the release of its latest economic forecasts, which cut growth outlooks for the U.S., U.K. and many Asian countries. While economists, central bankers and politicians have been engaged in panels and behind-the-scenes talks, many are attempting to work out whether trade tensions between China and the U.S. are — or perhaps are not — cooling.

Policymakers from the European Central Bank that CNBC spoke to this week broadly stuck a dovish-leaning tone, indicating they saw interest rates continuing to fall and few upside risks to euro zone inflation. However, all stressed the current high levels of uncertainty, the need to keep monitoring data, and the high risks to the growth outlook — sentiments also echoed by Bank of England Governor Andrew Bailey in his interview with CNBC on Thursday.

These were some of the main messages from ECB members this week.

Christine Lagarde, European Central Bank president

On inflation and monetary policy:

“We’re heading towards our [inflation] target in the course of 2025, so that disinflationary process is so much on track that we are nearing completion. But we have the shocks, you know, and the shocks will be a dampen on GDP. It’s a negative shock to demand.”

“The net impact on inflation will depend on what countermeasures are eventually taken by Europe. Then we have to take into account the [German] fiscal push by the defense investments, by the infrastructure fund.”

“We have seen successive movements, you know, announcement [of U.S. tariffs], and then a pause, and then some exemptions. So we have to be very attentive… Either we cut, either we pause, but we will be data dependent to the extreme.”

Watch CNBC's full interview with ECB president Christine Lagarde

On market moves:

“When we had done our projections, we anticipated that… the dollar would appreciate, the euro would depreciate. It’s not what we saw. And there have been some counter-intuitive movements in various categories.”

“The German market has obviously been shocked in a positive way by the program soon to be put in place by the German government, with a commitment to defense, with a commitment to a big fund for infrastructure development.”

Klaas Knot, The Netherlands Bank president

On tariff uncertainty:

“If I look back over the last 14 years, in the initial days of the pandemic I think that was comparable uncertainty to what we have now.”

“In the short run, it’s crystal clear that the uncertainty that is created by the unpredictability of the tariff actions by the U.S. government works as a strong negative factor for growth. Basically, uncertainty is like a tax without revenue.”

On the inflation impact:

“In the short run, we will have lower growth. We will probably also have lower inflation. As we also see, the euro is appreciating as energy prices have also come down. So together with the sort of negative factor uncertainty in the short run, it’s crystal clear that it will accelerate the disinflation.”

It's 'crystal clear' that tariffs could hit growth in the short term, ECB's Knot says

“But in the medium term, the inflation outlook is not all that clear. I think there are still these negative factors. But in the medium term, you might get retaliation. You might get the disruption of global value chains, which might also be inflationary in other parts of the world than the U.S. only. And then, of course, we have the fiscal policy coming in in Europe. So this is actually a time in which you need projections.”

On a June rate cut and market pricing for two more ECB rate cuts in 2025:

“I’m fully open minded. I think it’s way too early to already take a position on June, whether it would be another cut. It will fully depend on these projections.”

“I would need to see a more structured analysis of the impact on the inflation profile ahead of us, and only then can I say whether the market is pricing fair or whether I don’t.”

Robert Holzmann, Austrian National Bank governor

On the need to wait for more data and news on tariffs:

“We have not seen this uncertainty now for years… unless the uncertainty subsides, by the right decisions, we will have to hold back a number of our decisions, and hence, we don’t know yet in what direction monetary policy should be best moved.”

“Before looking at data in detail, the question is, what kind of political decisions will be taken? Is it that we will have some tariff increases? Is it that we will have strong tariff increases? Is it that we will have retribution by high counter tariffs?”

We have not seen this much uncertainty for years, Austrian central bank governor says

On the ECB’s April rate cut:

“I think there’s a broad consensus [on rates]. But of course, at the margin, people differ.”

“My assessment is that at this time, it wasn’t clear yet to what extent [tariff] countermeasures were being taken. Because with countermeasures in Europe, prices may have increased. Without countermeasures, quite likely the price pressure is downward. And for the time being, we don’t know yet the direction.”

On the direction of interest rates:

“I think if the recent noises about an arrangement [on trade] were to be true, in this case, quite likely it is more towards the downside than the upside with regard to prices. But this can be changed with different decisions and the result of which, we may even imagine in [the] other direction. For the time being, no, it will be down.”

“There may be further cuts this year, but the number is still outstanding.”

Mārtiņš Kazāks, Bank of Latvia governor

On opportunity from tariffs:

“With all this uncertainty and vulnerability, this is also the time of opportunities for Europe.”

“It’s a time for Europe to grasp all the aspects of being an economic superpower and becoming a really fully-fledged political and geopolitical superpower, and this requires doing all the decisions that in the past, were not carried out fully.”

“This requires political will, political guts to make those decisions, and to strengthen the European economy and assert its place in a global world.”

Global vulnerability an opportunity for Europe, says ECB's Kazāks

On market reaction to tariffs:

“So far it seems to be relatively orderly … but if one looks at the spillovers to Europe, the financial markets are working more or less fine, we haven’t seen spreads exploding or anything like that.”

“But in terms, however, of the macro scenarios, this uncertainty is extremely elevated in the sense that, given the possible outcomes, the multiple scenarios and their probabilities are very similar with the baseline [tariff] scenario.”

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Economics

Trump insists bond market tumult didn’t influence tariff pause: ‘I wasn’t worried’

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US President Donald Trump speaks during a bilateral meeting with Prime Minister of Norway Jonas Gahr Store in the Oval Office of the White House in Washington, DC, on April 24, 2025.

Saul Loeb | Afp | Getty Images

President Donald Trump denied that an aggressive bond market sell-off influenced his decision earlier this month to hold off on aggressive “reciprocal” tariffs against U.S. trading partners.

“I wasn’t worried,” Trump said in a Time magazine interview during which he was asked about financial market tumult after his April 2 “liberation day” announcement.

In the decree, Trump slapped 10% across-the-board duties against all U.S. imports and released list of tariffs against dozens of other nations. The extra levies were based on trade deficits the U.S. had against the respective countries and raised fears about inflation, a potential recession and disruption of long-held trade agreements.

Markets recoiled following the release. Treasury yields initially headed lower but quickly snapped higher. The 10-year yield rose half a percentage point in just a few days, one of its quickest moves ever, as investors also ditched stocks and the U.S. dollar.

Ultimately, Trump issued a 90-day stay on the reciprocal tariffs to allow time for negotiation. But he said it wasn’t because of the market tumult.

Pres. Trump to TIME: Would consider it a total victory if U.S. still has 50% tariffs in a year

“No, it wasn’t for that reason,” Trump told Time in the interview from Tuesday that was published Friday. “I’m doing that until we come up with the numbers that I want to come up with. I’ve met with a lot of countries. I’ve talked on the telephone. I don’t even want them to come in.”

Yields have since moved lower, with the 10-year most recently around 4.28%, about a quarter percentage point higher than its recent low. Trump had said when he made the decision to hold off that the bond market had gotten the “yips.”

“The bond market was getting the yips, but I wasn’t. Because I know what we have,” he said. “I know what we have, but I also know we won’t have it for long if we allowed four more years of the gross incompetence. This thing was just running — it was running as a free spirit. This was — this was the most incompetent president in history.”

Though negotiations over tariffs are ongoing, Trump added that he would consider it a “total victory” even if the U.S. has levies as high as 50% still in place a year from now.

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Bank of England chief focused on tariff ‘growth shock’

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Bank of England governor: We're seeing the uncertainty effect of tariffs

The Bank of England is focused on the potential impact of U.S. tariffs on U.K. economic growth if there is a slowdown in global trade, the central bank’s governor Andrew Bailey said Thursday.

“We’re certainly quite focused on the growth shock,” Bailey told CNBC’s Sara Eisen in an interview at the IMF-World Bank Spring Meetings.

Going into its May 8 monetary policy meeting, the central bank will consider “arguments on both sides” around the impact of tariffs on growth and domestic supply constraints on inflation, Bailey said.

“There is clearly a growth issue we start with, with weak growth … but a big question mark is how much of that is caused by the weak demand, how much of it is caused by a weak supply side,” he continued.

“Because the weak supply side, of course, unfortunately, has the sort of the upside effect on inflation. So we’ve got to balance those two. But I think the trade issue is now the new part of that story.”

Inflation could be pulled in either direction by wider forces, with a redirection of trade exports into other markets being disinflationary, but a retaliation on U.S. tariffs by the U.K. government — which he stressed did not appear likely — pushing up inflation.

Bailey added that he did not see the U.K. as being close to a recession at present, but that it was clear economic uncertainty was weighing on business and consumer confidence.

IMF downgrade

The IMF earlier this week downgraded its 2025 growth forecast for the U.K. to 1.1% from 1.6%, citing the impact of U.S. President Donald Trump’s trade tariffs, higher borrowing costs and increased energy prices.

However, economic forecasting remains mired in uncertainty as countries engage in negotiations with U.S. officials over Trump’s swingeing universal tariff policy, currently on pause. The U.S. has imposed 25% tariffs on steel, aluminum and autos and a 10% levy on other British exports.

U.K. policymakers have expressed hopes of reaching a trade deal with the White House, with U.S. Vice President J. D. Vance saying there is a “good chance” of an agreement.

Bailey told CNBC on Thursday that he would be “very encouraged if the U.K. does make a deal,” but that its economy was very open and services-oriented, so it would still be impacted by a wider slowdown in growth or trade.

He also noted that inflation would increase from the current 2.6% in the coming readings due to effects from markets such as energy prices and water bills, but that the bump up would be “nothing like what we saw a few years ago.”

The Bank of England held interest rates at 4.5% at its March meeting, before Trump shocked the world with the scale of his tariff announcement.

Markets now see the BOE slashing rates to 4% by its August meeting.

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