Heavy Machinery Maker Charged with Wrongdoing

Caterpillar Inc. (NYSE: CAT)

Federal authorities raided Caterpillar’s headquarters in Illinois In March of 2017, accusing them of tax and accounting fraud.  In a rare accusation of a multi-national company of tax fraud, the report issued by the Government could result in quite significant penalties.  Federal authorities had been looking at CAT for years, with a whistleblower leak in 2009 leading to a serious investigation which culminated to the raid in March.  

The report focuses on their overseas business and tax transactions involving appropriations of billions of dollars.  US Corporations owe income tax at the 35% corporate tax rate on profits earned worldwide.  They are permitted to defer those taxes, however, until bringing those earnings back into the United States when they will be assessed US corporate income tax with a credit for taxes paid overseas.  Exceptions to the rule exist, with money reported in the form of loans at the center of this investigation.

The report accuses Caterpillar of bringing billions of dollars back from offshore affiliates without paying the proper amount of tax.  The investigation led by the Inspector General of the FDIC, which investigates possible criminal activities from financial institutions, and the United States attorney’s office for the Central District of Illinois, involves a Swiss subsidiary of Caterpillar.  The report outlines that billions of dollars in profits from CSARL in Switzerland from 2007 – 2012 should have been taxed at much higher US income tax rates.  The IRS could potentially impose up to $2 billion in taxes and penalties on profit earned by CSARL.  

Caterpillar claims that the profits were determined to have been reinvested outside the US, and they are contesting the accusations stating that they complied with all tax laws and did not violate any judicial doctrines.  

There is no ruling yet, however many professionals close to the case feel that Caterpillar’s noncompliance with US financial tax laws and reporting rules was deliberate in order to maintain a higher share price.  

Caterpillar is one of the 30 companies in the Dow, and shortly after the raid in March, shares of Caterpillar fell 2%.  In spite of the ongoing investigation, their latest earnings report in October of 2017 was up 27.5% year to date, while trading at a rich 25 times earnings estimates.  

For current information on corporations, trading or investment services you can trust, contact Great Point Capital today.  

Great Point Capital is a member of FINRA offering professional service, wealth management and execution to retail customers.  We are a leader in the equity day trading community with more than 100 prop traders currently trading the firm’s capital with stock leverage. We provide the latest in technology including Takion trading software and our proprietary intra communication platform.  Contact us today to learn how we can take your successful trading strategy to the next level.   

Equifax Breach One of the Largest in History

Equifax Inc. (NYSE: EFX)

We all heard about the massive data breach in September of 2017, when Equifax exposed personal information of nearly half of the US population, up to 143 million customers.  Information exposed included credit card numbers, social security numbers, birthdays, driver’s license numbers and addresses in what is known as one of the largest data breaches in history.  

Making matters worse, Equifax accidentally directed customers to a fake phishing site, when trying to calm the nerves of the public.  A secure website was set up for customers, which was www.equifaxsecurity2017.com, to aid in determining whether people had been affected by the breach.  On several occasions over the weeks following the incident, Equifax responded to customer inquiries with their official Twitter account by accidentally directing them to a fake phishing site at www.securityequifax2017.com.  

This was a huge mistake at a time when they were trying to earn back the public’s trust, at the precise moment when the public was looking for reassurances about the safety of their personal information, bank accounts and investments.  Additionally, Equifax tweeted the fake phishing site address at least three times before it was noticed.  

They then issued a warning to the public stating that consumers should beware of fake websites appearing to be operated by Equifax, stating again that consumers can sign up for free monitoring and learn more at https://www.equifaxsecurity2017.com, adding that their homepage is Equifax.com.  Equifax was criticized for creating a completely different domain for customers rather than having a response page within their own domain of Equifax.com.   This made it very confusing for customers to recognize whether or not the site was real.   

Luckily, it turned out that the fake site was created by pranksters with no malicious intent, and was for the purpose of exposing the mass potential for errors.  This was evident in the first heading on the fake website which included the words: “Why Did Equifax Use a Domain That's So Easily Impersonated by Phishing Sites?"  

Of all the companies to have a massive data breach, and then to mistakenly direct consumers to a fake phishing site, one of the three major credit reporting agencies that contains private and personal information on half of the US population was one of the worst possible scenarios.

Many feel they should have then made a smarter choice about the domain they created to resolve this massive problem.   That is the exact reason why many companies will purchase the domains of common misspellings of their business, to keep customers from landing on a fake site instead of their real company website.  

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The Year for Investigations into Drug Makers

As we near the close of 2017, we are not at a loss for corporate scandal, wrongdoings on the part of corporate CEOs and employees.  The pharmaceutical industry has long been at the center of investigations, and lawmakers in 45 states are now taking action.   

Perrigo Co. (NYSE: PRGO), Mylan (MYL) & Many Other Generic Drug Makers

The largest maker of over-the-counter drugs in the world, Perrigo Co., was the focus of a corporate scandal in May when the Department of Justice raided their offices during an investigation into price collusion.  The government was looking mainly at the price of drugs that Perrigo manufactures for skin conditions.

Price collusion happens when companies conspire with each other to generate an unfair market advantage.  Mylan NV (MYL) is one of the companies accused, and you might remember their involvement with the notorious price fixing scandal in 2016 involving the EpiPen.  

On October 31, 2017, investigations into price gouging of big pharma culminated into a large group of US states accusing key generic drug makers of participating in a far-reaching price fixing scheme.  The investigation widened an existing lawsuit by adding many more drug makers and medicines, sending some drug maker company shares falling.  

Attorney Generals from 45 states and the District of Columbia are accusing 18 companies while naming 15 medicines in the lawsuit, which includes the president of Mylan NV and CEO of India’s Emcure Pharmaceuticals. The charges allege the company executives agreed in advance upon prices, price increases and the percentage of market share that each company would have.  

One Attorney General states in the suit that it is their belief that price fixing is pervasive, systematic and exists in a culture of collusion.  

For the most recent company information, trading or investment services you can trust, contact Great Point Capital today.  

Great Point Capital is a member of FINRA offering professional service, wealth management and execution to retail customers.  We are a leader in the equity day trading community with more than 100 prop traders currently trading the firm’s capital with stock leverage. We provide the latest in technology including Takion trading software and our proprietary intra communication platform.  Contact us today to learn how we can take your successful trading strategy to the next level.