September 26, 2018 / 9:37 PM / 21 days ago

Caterpillar wins dismissal in U.S. of post-raid lawsuit tied to tax probes

Sept 26 (Reuters) - Caterpillar Inc on Wednesday won the dismissal of a lawsuit accusing the heavy machinery manufacturer of misleading shareholders about risks it allegedly took on by using foreign subsidiaries to avoid paying U.S. taxes.

U.S. District Judge Sharon Johnson Coleman in Chicago said plaintiffs led by Société Générale Securities Services failed to show that Caterpillar intended to defraud them, or knowingly made false statements about criminal and civil probes into its tax practices.

The lawsuit was filed on March 3, 2017, one day after Caterpillar's market value sank more than $2.4 billion as agents from the Department of Commerce, Federal Deposit Insurance Corp and Internal Revenue Service raided three of its facilities, including its former headquarters in Peoria, Illinois.

Caterpillar said last month it is still "vigorously contesting" an IRS demand that it pay $2.3 billion in taxes and penalties for allegedly shifting profit to a Swiss parts unit, Caterpillar SARL, to reduce its tax bill at home.

The lawsuit sought class action status from Feb. 12, 2013 to March 1, 2017, and was dismissed without prejudice, meaning Société Générale can try to bring it again. Its lawyers did not immediately respond to requests for comment.

Caterpillar did not immediately respond to similar requests for comment. Chief Executive Jim Umpleby and his predecessor Douglas Oberhelman were among five other defendants. The company is now based in Deerfield, Illinois.

Shareholders often sue companies in the United States after unexpected negative news causes their stock prices to fall.

But Coleman said Caterpillar had provided "meaningful cautionary language" when publicly discussing its taxes and the probes, including a January 2015 grand jury subpoena, and was not obligated to confess wrongdoing prematurely.

"Citing the grand jury subpoena and execution of search warrants, Société Générale essentially argues that Caterpillar should have admitted a securities or tax law violation while the investigations were ongoing," the judge wrote.

"This court finds such a position untenable. If every investigation or executed search warrant was evidence of wrongdoing then what purpose do hearings and trials have."

The case is Société Générale Securities Services GMBH v. Caterpillar Inc et al, U.S. District Court, Northern District of Illinois, No. 17-01713. (Reporting by Jonathan Stempel in New York; Editing by Lisa Shumaker)

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