A unit of Caterpillar Inc (CAT.N) is being probed by federal investigators to determine if it had dumped train parts into the ocean off California as part of a scam to charge customers for parts they didn't need, the Wall Street Journal reported.
Investigators are probing whether Progress Rail was dumping brake parts and other items into the sea near the Port of Long Beach to conceal evidence that it was charging owners of rail equipment for replacing parts that were still in good shape, the paper said, citing people familiar with the matter.
Progress Rail, which was acquired by Caterpillar in 2006 for about $800 million, repairs locomotives and railcars.
Railroad operator Union Pacific Corp (UNP.N) was one customer believed to have been affected by the alleged activities, the newspaper said, citing the people. (r.reuters.com/syp84v)
The grand jury investigation is being conducted by the U.S. Attorney for the Central District of California because of suspicions that Progress Rail was breaking environmental laws, according to a person familiar with the situation, the Journal said.
Executives at Caterpillar and Progress Rail were unavailable for comment outside normal office hours.
Earlier this year, the world's largest maker of mining and construction equipment wrote off most of the $654 million value of its purchase of ERA Mining Machinery Ltd after uncovering "deliberate, multi-year, coordinated accounting misconduct" at ERA subsidiary Zhengzhou Siwei.
(Reporting by Rohit T. K. in Bangalore; Editing by Maju Samuel)