Heavy-equipment maker Caterpillar (NYSE:CAT) just can't catch a break. As if a globally depressed mining industry, falling sales, plant closings, and layoffs weren't enough, its locomotive repair division is under investigation to determine whether it improperly billed customers for unnecessary repairs and dumped railcar parts at sea to hide its actions. So it's being investigated not only for possible fraudulent billing practices, but for potential environmental crimes as well. 

Electro-Motive diesel. Source: https://www.facebook.com/caterpillar.

In its third-quarter earnings report, Caterpillar said it had received a grand jury subpoena related to charges that its wholly owned subsidiary Progress Rail engaged in the repair and billing scheme. The company also said the U.S. Attorney for the Central District of California was looking into violations of environmental laws, since it's alleged the company was dumping brake parts, equipment, and tools into the ocean to hide the fact that the repairs weren't needed.

Caterpillar acquired Progress in 2006 for approximately $1 billion, including the assumption of about $200 million in long-term debt. Caterpillar at the time said the purchase provided "an excellent avenue for diversified revenue growth and earnings stability -- critical elements of our Vision 2020" -- its plan to be, in part, recognized as the leader everywhere it does business.

According to the Association of American Railroads, total U.S. rail traffic of almost 13 million carloads is down 0.5% year to date as of Nov. 16, though it's up 2.3% in Canada to 3.6 million carloads . During the recession, rail repair and maintenance work virtually dried up for the industry as railcars were mothballed, and though it's rebounded since then, with U.S. intermodal volumes jumping 7% in the latest period -- its 20th consecutive week of gains -- Progress Rail may have been feeling the pinch to bolster its numbers.

When you look at Caterpillar's three-month rolling dealer statistics, it's a gloomy assessment of where the heavy-equipment maker's immediate future lies. The North American market had been providing its one ray of light lately, but even that turned south with a 2% drop in retail sales of machines in October. Indeed, my hope that the segment would be its catalyst for growth seems to have fallen flat.

It's been hard for Cat to catch a break, but Bank of America did upgrade its stock to a buy today, saying that its power systems division, of which its rail business is a part, is the sole hope it has, contributing as much as half of its operating earnings next year, something it currently does, along with 37% of total revenues.

With the company's shares down 5% year to date, but 13% over the past 12 months, I remain cautiously optimistic that Caterpillar will turn into a stellar performer yet.