“Whistleblower” is the term used for someone who reports something illegal or unethical in an organization, either internally or to a government agency. That organization can be a government, nonprofit, or private entity. It can include just about any type of wrongdoing, from employment discrimination to bid rigging to illegal pollution to cheating on taxes. Because $2.3 billion of unpaid taxes is in dispute, one whistleblower helping the IRS may be awarded between $300 million and $600 million, the most any IRS whistleblower has ever collected.

The Company at issue is one of America’s most famous, Caterpillar, according to Bloomberg. You may see its heavy construction equipment locally and anywhere you travel, whether across the State or globe. Daniel Schlicksup was a high level accountant and his personnel reviews at one time were positive. “He has a unique combination of leadership, financial, legal, business and communication skills,” according to a supervisor’s 2001 remarks, and in 2005 he was described as a “dedicated individual who does the right thing for the company, even if very unpopular.”

What turned out to be “very unpopular” with the Company was that in 2008, after hearing the Company’s CEO talk about the importance of ethics and honesty, Schlicksup reported to two people internally that the Company was illegally evading income taxes with the help of outside law and accounting firms. The malefactors invented a Swiss shell company, so, on paper, the shell purchased parts as a Swiss company, instead of as Caterpillar, an American company. The shell paid taxes to the Swiss government at the lower Swiss rate, not to the U.S. Government at the higher U.S. tax rate, thereby doubling the profit margin on parts.

Though the Company disagrees, Schlicksup states the only purpose of the Swiss entity is to evade taxes, which would make it illegal. Under U.S. law, a corporate taxpayer must show a restructuring would have a substantial impact on the entity’s assets or pretax profits, which is separate from its tax burden. Said one commentator, “If you’re going to filter your taxes through an ice cream truck, it’s wise to sell some ice cream out of it, too.” Caterpillar maintains it has done nothing illegal.  It says it “thoroughly investigated” Schlicksup’s allegations and then found itself not guilty of any wrongdoing.

Unfortunately for Caterpillar, the Company has admitted to the Securities and Exchange Commission as of three months ago that it now faces (although it continues to dispute) $2.3 billion of back taxes and penalties for IRS audits from 2007 to 2012, and the penalties could grow. 

The IRS began its active investigation after Schlicksup filed a wrongful discharge suit many years ago, and disclosed the Company’s fraudulent tax evasion scheme, along with his claim that he was punished for reporting it.

At one point, Schlicksup was moved to another job within Caterpillar. He later filed an IRS whistleblower complaint, claiming Caterpillar committed tax fraud, and another complaint with the U.S. Occupational Safety and Health Administration, because his employer allegedly retaliated against him for raising concerns about “improper and illegal conduct.” His allegations went public when he filed a retaliation lawsuit in June 2009 in federal court, a claim that was later settled.

Because of Schlicksup’s activities, the IRS, FDIC, Department of Commerce, and a U.S. Senate Committee have all become involved. Agents raided Caterpillar’s Illinois headquarters in March of 2017 and obtained documents in a wide range of areas, including possible proof of sales to Sudan, Syria, and Iran, all in violation of U.S. export bans. Investigators may have believed the Company hadn’t been forthcoming with information, or that evidence was about to be destroyed.

The IRS awards between 15% and 30% of what it collects from a whistleblower’s tipoffs. If Caterpillar pays the full $2.3 billion at issue, Schlicksup could get from $300 million to $600 million.

In the meantime, Schlicksup no longer works for Caterpillar.  He still lives in the Peoria, Illinois area, where the Company is headquartered.  He probably waits by the phone every day to see whether his fortunes have changed for the much better.

If you have suffered because you rightly reported unethical or illegal practices at an organization, and you are now the victim of unlawful retaliation, please contact our office right away. Our experienced “whistleblower” lawyers will do our best to help you. We will discuss the facts, explain the law, and help you figure out the wisest course of action under the circumstances, with the goal of attaining economic and social justice for you.  Missteps may result in the loss of your ability to file a legal action or collect a reward, so proceed with caution.  Call us today.  You will be glad you did.