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 Services Corp was dumping brake parts and other items into the sea near the Port of Long Beach, the paper said, citing people familiar with the matter. (r.reuters.com/syp84v).
The dumping was part of an effort to conceal evidence that Progress was charging owners of rail equipment for replacing parts that were still in good shape, the paper said.
Caterpillar said in a regulatory filing on November 1 that Progress Rail had received a subpoena from a U.S. federal court in California related to the investigation.
The grand jury investigation is being conducted by the U.S. Attorney for the Central District of California because of suspicions that Progress was breaking environmental laws, according to a person familiar with the matter, the paper said.
A spokeswoman for the world's largest maker of mining and construction equipment repeated on Friday that the company was cooperating with authorities and had no further comment.
Progress Rail, 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 Journal said.
Caterpillar has had trouble before with companies it has acquired.
Earlier this year, the company 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 and Saumyadeb Chakrabarty)