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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

Trump tariffs’ effect on consumer prices debated by economists

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The U.S. government is set to increase tariff rates on several categories of imported products. Some economists tracking these trade proposals say the higher tariff rates could lead to higher consumer prices.

One model constructed by the Federal Reserve Bank of Boston suggests that in an “extreme” scenario, heightened taxes on U.S. imports could result in a 1.4 percentage point to 2.2 percentage point increase to core inflation. This scenario assumes 60% tariff rates on Chinese imports and 10% tariff rates on imports from all other countries.

The researchers note that many other tariff proposals have surfaced since they published their findings in February 2025. 

Price increases could come across many categories, including new housing and automobiles, alongside consumer services such as nursing, public transportation and finance. 

“People might think, ‘Oh, tariffs can only affect the goods that I buy. It can’t affect the services,'” said Hillary Stein, an economist at the Boston Fed. “Those hospitals are buying inputs that might be, for example, … medical equipment that comes from abroad.” 

White House economists say tariffs will not meaningfully contribute to inflation. In a statement to CNBC, Stephen Miran, chair of the Council of Economic Advisers, said that “as the world’s largest source of consumer demand, the U.S. holds all the leverage, which means foreign suppliers will have to eat the economic burden or ‘incidence’ of the tariffs.” 

Assessing the impact of the administration’s full economic agenda has been a challenge for central bank leaders. The Federal Open Market Committee decided to leave its target for the federal funds rate unchanged at the meeting in March. 

The Fed targets its overnight borrowing rate at between 4.25% and 4.5%, with the effective federal funds rate at 4.33% on March 31, according to the New York Fed. The core personal consumption expenditures price index inflation rate rose to 2.8% in February, according to the Commerce Department. Forecasts of U.S. gross domestic product suggest that the economy will continue to grow at a 1.7% rate in 2025, albeit at a slower pace than what was forecast in January.  

Consumers in the U.S. and businesses around the world are bracing for impact. 
 
“There is a reason why companies went outside of the U.S.,” said Gregor Hirt, chief investment officer at Allianz Global Investors. “Most of the time it was because it was cheaper and more productive.” 

Watch the video above to learn how much inflation tariffs may cause.

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Trump’s tariff gambit will raise the stakes for an economy already looking fragile

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U.S. President Donald Trump speaks alongside entertainer Kid Rock before signing an executive order in the Oval Office of the White House on March 31, 2025 in Washington, DC. 

Andrew Harnik | Getty Images

President Donald Trump is set Wednesday to begin the biggest gamble of his nascent second term, wagering that broad-based tariffs on imports will jumpstart a new era for the U.S. economy.

The stakes couldn’t be higher.

As the president prepares his “liberation day” announcement, household sentiment is at multi-year lows. Consumers worry that the duties will spark another round of painful inflation, and investors are fretting that higher prices will mean lower profits and a tougher slog for the battered stock market.

What Trump is promising is a new economy not dependent on deficit spending, where Canada, Mexico, China and Europe no longer take advantage of the U.S. consumer’s desire for ever-cheaper products.

The big problem right now is no one outside the administration knows quite how those goals will be achieved, and what will be the price to pay.

“People always want everything to be done immediately and have to know exactly what’s going on,” said Joseph LaVorgna, who served as a senior economic advisor during Trump’s first term in office. “Negotiations themselves don’t work that way. Good things take time.”

For his part, LaVorgna, who is now chief economist at SMBC Nikko Securities, is optimistic Trump can pull it off, but understands why markets are rattled by the uncertainty of it all.

“This is a negotiation, and it needs to be judged in the fullness of time,” he said. “Eventually we’re going to get some details and some clarity, and to me, everything will fit together. But right now, we’re at that point where it’s just too soon to know exactly what the implementation is likely to look like.”

Here’s what we do know: The White House intends to implement “reciprocal” tariffs against its trading partners. In other words, the U.S. is going to match what other countries charge to import American goods into their countries. Most recently, a figure of 20% blanket tariffs has been bandied around, though LaVorgna said he expects the number to be around 10%, but something like 60% for China.

What is likely to emerge, though, will be far more nuanced as Trump seeks to reduce a record $131.4 billion U.S. trade deficit. Trump professes his ability to make deals, and the saber-rattling of draconian levies on other countries is all part of the strategy to get the best arrangement possible where more goods are manufactured domestically, boosting American jobs and providing a fairer landscape for trade.

The consequences, though, could be rough in the near term.

Potential inflation impact

On their surface, tariffs are a tax on imports and, theoretically, are inflationary. In practice, though, it doesn’t always work that way.

During his first term, Trump imposed heavy tariffs with nary a sign of longer-term inflation outside of isolated price increases. That’s how Federal Reserve economists generally view tariffs — a one-time “transitory” blip but rarely a generator of fundamental inflation.

This time, though, could be different as Trump attempts something on a scale not seen since the disastrous Smoot-Hawley tariffs in 1930 that kicked off a global trade war and would be the worst-case scenario of the president’s ambitions.

“This could be a major rewiring of the domestic economy and of the global economy, a la Thatcher, a la Reagan, where you get a more enabled private sector, streamlined government, a fair trading system,” Mohamed El-Erian, the Allianz chief economic advisor, said Tuesday on CNBC. “Alternatively, if we get tit-for-tat tariffs, we slip into stagflation, and that stagflation becomes well anchored, and that becomes problematic.”

Tariffs could be a major rewiring of the domestic and global economy, says Mohamed El-Erian

The U.S. economy already is showing signs of a stagflationary impulse, perhaps not along the lines of the 1970s and early ’80s but nevertheless one where growth is slowing and inflation is proving stickier than expected.

Goldman Sachs has lowered its projection for economic growth this year to barely positive. The firm is citing the “the sharp recent deterioration in household and business confidence” and second-order impacts of tariffs as administration officials are willing to trade lower growth in the near term for their longer-term trade goals.

Federal Reserve officials last month indicated an expectation of 1.7% gross domestic product growth this year; using the same metric, Goldman projects GDP to rise at just a 1% rate.

In addition, Goldman raised its recession risk to 35% this year, though it sees growth holding positive in the most-likely scenario.

Broader economic questions

However, Luke Tilley, chief economist at Wilmington Trust, thinks the recession risk is even higher at 40%, and not just because of tariff impacts.

“We were already on the pessimistic side of the spectrum,” he said. “A lot of that is coming from the fact that we didn’t think the consumer was strong enough heading into the year, and we see growth slowing because of the tariffs.”

Tilley also sees the labor market weakening as companies hold off on hiring as well as other decisions such as capital expenditure-type investments in their businesses.

That view on business hesitation was backed up Tuesday in an Institute for Supply Management survey in which respondents cited the uncertain climate as an obstacle to growth.

“Customers are pausing on new orders as a result of uncertainty regarding tariffs,” said a manager in the transportation equipment industry. “There is no clear direction from the administration on how they will be implemented, so it’s harder to project how they will affect business.”

While Tilley thinks the concern over tariffs causing long-term inflation is misplaced — Smoot-Hawley, for instance, actually ended up being deflationary — he does see them as a danger to an already-fragile consumer and economy as they could tend to weaken activity further.

“We think of the tariffs as just being such a weight on growth. It would drive up prices in the initial couple [inflation] readings, but it would create so much economic weakness that they would end up being net deflationary,” he said. “They’re a tax hike, they’re contractionary, they’re going to weigh on the economy.”

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Economics

Euro zone inflation, March 2025

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A man pushes his shopping cart filled with food shopping and walks in front of an aisle of canned vegetables with “Down price” labels in an Auchan supermarket in Guilherand Granges, France, March 8, 2025.

Nicolas Guyonnet | Afp | Getty Images

Annual Euro zone inflation dipped as expected to 2.2% in March, according to flash data from statistics agency Eurostat published Tuesday.

The Tuesday print sits just below the 2.3% final reading of February.

So called core-inflation, which excludes more volatile food, energy, alcohol and tobacco prices, edged lower to 2.4% in March from 2.6% in February. The closely watched services inflation print, which had long been sticky around the 4% mark, also fell to 3.4% in March from 3.7% in the preceding month.

Recent preliminary data had showed that March inflation came in lower than forecast in several major euro zone economies. Last month’s inflation hit 2.3% in Germany and fell to 2.2% in Spain, while staying unchanged at 0.9% in France.

The figures, which are harmonized across the euro area for comparability, boosted expectations for a further 25-basis-point interest rate cut from the European Central Bank during its upcoming meeting on April 17. Markets were pricing in an around 76% chance of such a reduction ahead of the release of the euro zone inflation data on Tuesday, according to LSEG data.

The European Union is set to be slapped with tariffs due in effect later this week from the U.S. administration of Donald Trump — including a 25% levy on imported cars.

While the exact impact of the tariffs and retaliatory measures remains uncertain, many economists have warned for months that their effect could be inflationary.

This is a breaking news story, please check back for updates.

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