Ingersoll-Rand Plc convinced the U.S. Department of Homeland Security last year that the manufacturer’s successful tax-avoidance strategy shouldn’t disqualify it from doing business with the federal government.
A 20-page legal memorandum laying out the North Carolina company’s case remains under wraps, however, because it contains “trade secrets” or other confidential information whose disclosure would likely damage the company, the department said this week.
The department made the statement in a letter rejecting Bloomberg’s request for the memo under the Freedom of Information Act.
Ingersoll-Rand’s eligibility as a federal contractor was thrown into question after it shifted its legal address out of the U.S. to reduce its tax bills, a maneuver known as “inversion.”
A U.S. industrial icon for more than a century, the company changed its legal domicile to Bermuda in 2001 and then Ireland in 2009. Its top executives, including Chief Executive Officer Michael Lamach, run the company from a suburb of Charlotte, North Carolina.
A Homeland Security spokeswoman, Marsha Catron, said the department follows the law and declined to comment further. Misty Zelent, of Ingersoll-Rand, said the company has treated its government clients with “care and transparency.”
The company had sales of almost $13 billion last year, including Thermo King refrigerated trucks, Trane air conditioners and Club Car golf carts.
Ingersoll-Rand’s 2001 inversion was criticized by lawmakers and helped lead Congress in 2002 to prohibit government contracts with companies that had engaged in inversions. The ban initially applied only to the Department of Homeland Security and was later expanded across the federal government.
That caused troubles for Ingersoll-Rand in 2008 when it acquired Trane, whose air-conditioning equipment cools buildings around the world, including U.S. military bases and government office complexes.
For some period of time, the company didn’t bid on government contracts covered by the ban because it wasn’t sure if it was eligible, Zelent said last year. The company also notified clients that it wasn’t allowed to do some government work.
In 2010, two House Democrats whose districts include Ingersoll-Rand factories, Representatives Ron Kind of Wisconsin and Ben Chandler of Kentucky, took up the company’s case. They wrote almost identical letters to the administration of President Barack Obama complaining about the ban. They asserted that Ingersoll-Rand was prohibited from bidding on government work, potentially threatening jobs in their districts.
In an interview in February, Chandler, who left office after the 2012 election, said he didn’t recall how the issue came to his attention but that it probably originated in a complaint from Ingersoll-Rand. Kind’s office issued a statement Thursday that didn’t address questions about the company’s role in drafting his letter.
Zelent declined to comment on Ingersoll-Rand’s involvement.
The administration responded to the lawmakers later in 2010 in letters from Jeffrey Zients, then the acting director of the Office of Management and Budget. He thanked them for their input and didn’t offer to make any changes.
Just a few years later, however, Ingersoll-Rand took the position that it wasn’t covered by the ban after all. Zelent, the company spokeswoman, said this conclusion followed an “exhaustive legal review.” The company laid out its case in the 20-page memo to Homeland Security.
In April 2014, Joseph Maher, principal deputy general counsel there, responded that he’d read the memo and said “we do not have reason to disagree.” His letter doesn’t describe the reasoning that led him to conclude the company isn’t subject to the ban.
Bloomberg requested a copy of the memo in September. Homeland Security said this week that its decision not to release the document came after it reviewed objections from Ingersoll-Rand.
Releasing the memo “is likely to cause substantial harm” to the company’s competitive position, Homeland Security wrote.
It’s unclear what competitive secrets could be contained in the company’s memo. Each time Ingersoll-Rand changed its legal address, to Bermuda and then Ireland, it announced the plan in a news release. To win shareholder approval for each deal, it made public disclosures that ran to more than 100 pages.
Just this month, Ingersoll-Rand scored its latest contracting win. It was one of 14 companies chosen by the Army Corps of Engineers on May 8 to install energy-saving equipment on U.S. military bases around the world.
The contract lasts for 20 years and allows Ingersoll-Rand to compete with the other companies for $1.5 billion of work.
Zelent said Ingersoll-Rand works with each procuring agency to ensure they’re comfortable that the company is complying with the law. The Army Corps was aware of the question about Ingersoll-Rand’s eligibility and consulted with legal staff before awarding the contract, said Julia Bobick, a spokeswoman.