US firm sued over Irish tax inversion fallout
Alleged misleading statements by Eaton Corp's top executives about the company's 'inversion' deal to move its headquarters to Ireland cost shareholders $3bn in stock value, a US trade union pension fund has charged in a class action filed in a US federal district court.
Eaton's move to Ireland is one of a string of so called tax inversions that this month were blamed for distorting Irish economic data.
The Steamfitters Local 449 Pension Plan filed the suit on July 22 in the Southern District of New York, seeking unspecified damages.
The lawsuit names Eaton Corp and Alexander Cutler, Eaton's former chairman and ceo as well as Richard Fearon, its vice chairman and chief financial officer. The union claimed they violated US securities law by making "false and misleading statements" about the company's ability to carry out a tax-free spin-off of its vehicle business after its merger with Dublin-based Cooper Industries.
Eaton makes electrical, hydraulic and mechanical equipment and has sales of $20bn.
In May 2012, it announced an $11.8bn merger with Cooper Industries under the umbrella of a new Irish holding company. The move slashed Eaton's tax bill.
Before and after the deal, Mr Cutler reassured analysts that the inversion wouldn't affect Eaton's ability to spin off its vehicle business, but later admitted the deal imposed a five-year restriction on tax-free spin-offs.
That effectively prevented the sale of Eaton's vehicle business until at least late 2017, it claimed. (Bloomberg)