Cisco probed in Brazil tax scheme

Cisco probed in Brazil tax scheme

	Published : Wed, 17 Oct 2007 06:14 By : Agencies Print this Story

SAO PAULO, Brazil (Thomson Financial) - Authorities raided Brazilian offices of Cisco Systems Inc., the world's largest manufacturer of computer network equipment, in an investigation of an alleged scheme to avoid duties on products shipped from offshore tax havens.

Police and tax agents also arrested dozens of people Tuesday and searched homes of Brazilians involved in the alleged plot. A former top Cisco executive for Brazil is among those under investigation, according to a statement issued by Federal Judge Alexandre Cassetari. The statement did not name the executive.

Cisco spokesman Felipe Lamus said the company is 'cooperating fully with the investigation' but declined to comment on the raids or on whether any current or former Cisco executives were among those arrested.

'We are currently in the process of establishing what exactly has happened and cannot comment further until we have more information,' Lamus said in an e-mail.

About 650 agents executed 93 search warrants, arresting 40 people allegedly involved in the ring to avoid import, sales and corporate taxes, federal police said in a statement. Police declined to name the company, but Cassetari said in the statement that Cisco was the corporation that benefited from the alleged scheme.

Authorities also seized $10 million in merchandise, a commercial jet, 18 vehicles and the equivalent of nearly $400,000 in Brazilian and U.S. currency during the raids, tax officials said in a separate statement.

No charges were immediately filed, but the judge said those involved used bogus documents and specified unreasonably low prices on imports of electronic and telecommunications products to avoid duties.

The investigation is also focusing on whether federal tax officials were involved. Possible charges that could be filed include gang formation, falsification of documents and corruption, the judge said.

The scheme, allegedly set up by Brazilian and U.S. companies to benefit the U.S. firm, prompted a two-year police investigation that focused on at least $500 million in products shipped to Brazilian clients from tax havens like Panama, the Bahamas and the British Virgin islands, according to the police statement.

Those goods could have generated $833 million in tax revenue for the Brazilian government, police said.

Cisco, headquartered in San Jose, Calif., started operations in Brazil in 1994 and has offices in Sao Paulo, Rio de Janeiro and the capital, Brasilia. Tuesday's raids took place in the southern Brazilian states of Sao Paulo and Rio de Janeiro and in the northeastern state of Bahia, police said.

The company's shares fell 50 cents, or 1.5 percent, to $32.29 Tuesday in New York, then gained 23 cents in after-hours trading.

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