Caterpillar hearing morphs into tax-code debate

he Senate committee hearing was scheduled to focus on heavy machinery giant Caterpillar's avoidance of $2.4 billion in U.S. taxes by shifting profits to a wholly owned Swiss subsidiary.

But Tuesday's proceeding, held as Americans prepare for the annual April 15 tax-filing deadline, instead featured partisan debating points over the federal tax code and U.S. industry competitiveness.

For nearly five hours, Sen. Carl Levin, the Michigan Democrat who chairs the Permanent Subcommittee on Investigations, single-handedly grilled officials of Caterpillar and the company's accounting firm about the Switzerland tax strategy.

A report by the panel's Democratic majority staff concluded that the shift of $8 billion in international machinery-parts profits to the subsidiary was made possible by legal tax loopholes — though little changed with the manufacturer's parts business.

EARLIER: Report says Caterpillar avoided $2.4B in taxes

"Most of Caterpillar's parts executives are here, most of its parts employees are here, most of its parts are designed here, most of its parts are built here, most of its parts are stored here, most of its orders are filled here and most of its parts are shipped from here," said Levin. "Yet most of its international parts profits go to Switzerland."

Executives of Caterpillar and Pricewaterhouse Coopers, the accounting and auditing firm that helped devise the strategy, said the change aligned machinery-parts management with the manufacturer's growing international business.

" I want to emphasize Caterpillar complies with the U.S. tax laws, and we pay everything we owe," said Julie Lagacy, vice president of the company's finance services division. She stressed that the company pays an effective tax rate that averages about 29%, higher than at some U.S. firms.

Levin, however, highlighted internal documents about Caterpillar's plan to transfer parts-management to a "low-tax" jurisdiction. He also cited a 2008 e-mail in which PwC executives who helped devise the strategy wrote: "We are going to have to create a story that will put some distance between them and parts ... to retain the (tax) benefit. Get ready to do some dancing."

"It was a tax deal," said Levin, arguing the U.S. Treasury and taxpaying Americans were harmed.

Committee Republicans insisted the only villain was the tax code.

"There's no doubt that that's a factor in moving operations overseas" and "parking those profits overseas rather than bringing them back to be subjected to a 35% corporate tax rate," said Sen. John McCain, R-Ariz., the panel's ranking GOP member. "This makes a compelling argument for broader tax reform in order to ensure our tax code is fair, competitive and a vehicle for economic growth."

Sen. Ron Johnson, R-Wis., questioned the hearing testimony of legal experts who expressed skepticism about Caterpillar's tax strategy. If the manufacturer were suspected of doing anything improper to reduce its tax bill, that should be addressed by the IRS or U.S. Tax Court, "not Congress," he said.

Sen. Rand Paul, R-Ky., went further, arguing that the subcommittee should give Caterpillar an American business award "instead of vilifying people for legal behavior."

Source:

www.usatoday.com

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Sheryl Sandberg sells half her stake in Facebook

Sheryl Sandberg: has sold about 10 million shares worth some $400 million since Facebook made its stock-market debut in May 2012. Photograph: Erin Lubin/Bloomberg
Sheryl Sandberg, Facebook’s number-two executive, has shed more than half her stake in the social networking company since its initial public offering less than two years ago, according to an analysis of recent regulatory filings.

The series of disposals, some of which were made to satisfy tax bills, are likely to add to persistent questions about whether Ms Sandberg is eyeing an eventual departure from the company for a future in government or as head of another large company.

However, her name has yet to be closely linked to any senior corporate positions and she has denied any plans to compete for political office – most recently in January, when she said that politics was “not for me”.

Also, even after the disposals, Ms Sandberg’s stake, worth about $1 billion (€0.72 billion), still makes her one of the largest individual investors in Facebook with a 0.5 per cent stake.

As chief operating officer, the former Google executive was brought in at a critical time in Facebook’s development, when the company was first looking to ramp up its revenues and a young Mark Zuckerberg was still trying to find his feet.

The Facebook chief executive has since developed a greater management self-assurance and taken on many of the company’s key decisions, for instance in his personal handling of deals such as the acquisitions of WhatsApp and Instagram.

Ms Sandberg has frequently been talked of as a candidate for high office in Washington.

A former chief of staff to Larry Summers when he was treasury secretary under Bill Clinton, she was said to have been considered for that position during the first Obama administration.

Ms Sandberg has sold about 10 million shares worth some $400 million since Facebook made its stock-market debut in May 2012, according to filings with the Securities and Exchange Commission.

The sales were made under the “blind” trading plans that corporate executives use to spread their disposals out over a period of time, reducing the risk of being accused of trading on privileged information.

She also sold nearly 16 million shares in late 2012 to settle a tax bill that fell due when restricted stock she had in the company vested to become ordinary shares.

Along with some other small disposals, that has taken Ms Sandberg’s overall stake down to 17.2 million shares, restricted stock units and options in the social networking company. At the time of the IPO, she held about 41 million shares, most of them in the form of restricted stock units. – (Copyright The Financial Times Limited 2014)

Source:

www.irishtimes.com

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Asiana says jet partly to blame for SFO crash

The destroyed fuselage of Asiana Airlines Flight 214 is visible on the runway at San Francisco International Airport after it crashed on landing and burned on Saturday, July 6, 2013. Photo: Carlos Avila Gonzalez, The Chronicle

Asiana Airlines conceded Monday that its pilots were flying a Boeing 777 too slowly in the seconds before the plane crashed last year atSan Francisco International Airport, but said the aircraft's navigation equipment was partly to blame.

The South Korean airline said in a filing with the National Transportation Safety Board that the causes of the July 6 crash were "complex and interrelated." But it said the plane's navigation instruments had "led the crew to believe" the jet was maintaining enough speed for the aircraft to land safely.

Instead, the plane was flying too slowly as it came in for a landing and slammed into a seawall short of the runway. The crash left three young Chinese passengers dead, including one who apparently survived being ejected but was run over by two San Francisco fire rigs.

Boeing told federal investigators in a filing Monday that the plane's navigation equipment had been functioning normally and had not contributed to the crash. Boeing's chief engineer for air safety investigations, Michelle Bernson, blamed the crash on the "crew's failure to monitor and control airspeed, thrust level and glide path."

The federal safety board is investigating the cause of the crash and may issue safety recommendations. It hopes to complete its report before the crash's one-year anniversary.

In its filing, Asiana told investigators that something happened to the autopilot device when the plane was at 1,600 feet and headed to a safe landing. "For an unknown reason," the autopilot issued an order that commanded the plane to climb to 3,000 feet, the airline said.

Two of the three pilots in the cockpit said they did not remember pressing a button that would prompt the navigation computer to change the plane's approach, Asiana said.

In its filing with the safety board, Boeing said the third pilot in the cockpit said it was possible he had pushed the button. Boeing contends that the cockpit's voice recorder captured the sound of the button being pressed as the plane reached the 1,600-foot level.

Three seconds after the button was activated, the pilot flying the plane, Lee Kang Kuk, shut off the autopilot and told the crew he was going to land manually. He reduced the plane's speed to counteract the autopilot's commands to raise the plane's altitude, Asiana said.

When Lee shut off the autopilot, he expected the jet's auto-throttle device to maintain a safe speed, Asiana said. But the auto throttle "surprisingly" shut down in the process, and no alarm sounded right away in the cockpit, the airline said.

With its speed dropping, the aircraft descended too quickly and came up short of the runway. The warning alarm eventually went off, 11 seconds before impact, but that was too late for the pilots to pull the plane out of its descent, Asiana said.

The Federal Aviation Administration urged Boeing in 2010 to install software on its auto-throttle devices that would cause them to reactivate automatically in the event of a sudden loss of speed, but the manufacturer has not done so, Asiana said.

The agency made the recommendation after an incident on a newer model Boeing 787 in which a pilot discovered problems similar to those on the flight that crashed at SFO, Asiana's report said.

Boeing responded that the Asiana crew had ignored many obvious warning signs well before the cockpit alarm went off and should have been able to avoid a crash.

Jaxon Van Derbeken is a San Francisco Chronicle staff writer. E-mail:jvanderbeken@sfchronicle.com Twitter: @jvanderbeken

Source:

www.sfgate.com

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