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It's a good old fashioned police raid at the Cisco offices

In what has sadly become an all too common occurrence in the corporate world these days, officials this week raided the offices of networking and communications giant Cisco.

Senior executives were arrested by Brazilian police and documents were seized for the Brazilian authority’s investigation, which believes that the company has committed tax fraud on a massive scale.

The Brazilian police claim that Cisco imported $500 million in electronics without paying import duties.  The Brazilian authorities state that Cisco owes it $826.4 million in taxes, fines and back interest.

In addition to the arrests of Cisco senior executives in Brazil, the police issued arrest warrants for five more suspects in the United States.

The Associated Press reports that Cisco is trying to cooperate with authorities regarding the two-year long investigation.

The raids were part of a concerted effort by the Brazilian police to break up a ring of tax evasion and corruption.  They began Tuesday, with the issue of 93 search warrants.  Over 650 police and tax agents descended on these locations and arrested 40 individuals.

Six government tax officials were also arrested in the raids, according to Reuters.

Police seized almost $10 million in equipment, $400,000 in U.S. and Brazilian cash, a commercial jet and 18 vehicles

Brazilian authorities believe the arrested suspects were involved in an alleged scheme set up by Brazilian businessman on behalf of Cisco.  According to police the elaborate scheme involved first shipping goods to Panama, the British Virgin Islands or the Bahamas, where they could avoid local taxes and underestimate the goods value.

Cisco previously had been a rarity in having a clean record in its international business dealings and a high rate of growth.

“Cisco has a rather solid record in terms of its successful emerging market growth being achieved without any material fraud, bribery, tax evasion issues, etc,” commented analyst Nikos Theodosopoulos.  “This potential investigation may be the first blemish for Cisco in this regard, but we believe it's premature to reach any conclusions at this early stage of the investigation.”

Cisco has been operating out of Brazil since 1994 and has offices in Sao Paulo, Rio de Janeiro and Brasilia.

Cisco recently was in the news for its deal with Microsoft to make their products compatible with each other, as reported at DailyTech.



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And the most criminal thing is...
By darkpaw on 10/17/2007 11:48:32 AM , Rating: 3
Cisco's prices!




RE: And the most criminal thing is...
By drebo on 10/17/2007 1:32:41 PM , Rating: 2
I know this was meant as a tongue in cheek comment, but still...

Cisco's prices are as high as they are because Cisco's products are incredibly high quality and rarely come up faulty. I realize that they do have some measure of proprietary protocols, but I believe this actually helps their ability to produce quality components.


RE: And the most criminal thing is...
By Etsp on 10/17/2007 2:22:27 PM , Rating: 2
Well...try Cisco's products under the Linksys Brand. What I want is a cheap, minimalistic wireless router that is reliable. 4 100mbps ports is not expensive. After having these kinds of products available to the public for a long time, do you think prices should have gone down or reliability should have gone up within the last 3 years? I do. Have they? No...they simply add bells and whistles and keep everything else the same.


RE: And the most criminal thing is...
By drebo on 10/17/2007 3:57:02 PM , Rating: 4
Linksys is Linksys and Cisco is Cisco. You cannot compare the two brands, even though Linksys is owned by Cisco now. They are two different brands with two different market segments.

Linksys stuff is cheap crap because it's not directed toward those applications which require high-availability or which are mission critical. Are there better budget brands than Linksys? Absolutely. Perhaps you should look to one of them. In fact, I don't even sell Linksys anymore. I sell Cisco on the high end and Netgear on the low end, and between the two, I've got a solution for everyone.

When you compare the products, you have to also realize that a 16-port gigabit switch is more than just 16 RJ-45 jacks wired into a circuit board. Netgear's got a great one for about $220 that works as a small office switch, but I can't really use this as my server room back bone...there's not enough switching bandwidth. I need a more powerful one. This is where the Ciscos and the HP ProCurves come in. Routing and VPNs are the same way.


By Oregonian2 on 10/17/2007 2:32:16 PM , Rating: 2
I talked to an IT guy for a local ISP a few months ago, there's at least one Cisco box that they used many of commercially and his opinion of it's quality was <expletive deleted>.

They also sometimes don't implement the industry standards correctly (ITU, IEEE, etc). But they being Cisco, the world follows doing it wrong their way in order to be compatible. It's kinda sad, but funny at the same time. Of course, because of that, their quality gets a boost, because being "Cisco compatible" means more pragmatically than "working properly". :-)


RE: And the most criminal thing is...
By darkpaw on 10/17/2007 3:12:05 PM , Rating: 2
While I did mean it mostly tongue in cheek like you said, there is quality and then there is single port $1000 10/100 add in cards.

Even buying 5+ year old used stuff on ebay to make a decent learning lab costs an arm and a leg.


RE: And the most criminal thing is...
By Kaa on 10/17/2007 6:26:30 PM , Rating: 2
Import this kind of used stuff is forbidden by Brazilian laws.


By darkpaw on 10/17/2007 9:07:33 PM , Rating: 2
wow, that really sucks.


RE: And the most criminal thing is...
By mikeyD95125 on 10/17/2007 10:57:15 PM , Rating: 2
It is?

I thought the government just puts extremely high taxes on imported electronic goods. Graphics cards are a great example. a 7900GT cost $300 in U.S. and it cost 1800R at the time of its release. Thats just crazy. If the U.S. gov levied those kinds of taxes now there would be another revolution.


RE: And the most criminal thing is...
By Samus on 10/17/2007 11:56:26 PM , Rating: 2
viva la resistance!


hmmm
By soconne on 10/17/2007 11:19:20 AM , Rating: 1
Well if I'm right, and I think I am, these execs will probably be forced to undergo sex changes and then made to work in the shemale porn industry in Brazil. Its quite large there and makes a lot of money. So I would not be suprised if the judge orders this setence. Anybody disagree?




RE: hmmm
By Kaa on 10/17/2007 11:37:54 AM , Rating: 4
Seems you know a lot about shemale porn... thats weird... tell us more.


RE: hmmm
By soconne on 10/17/2007 11:42:42 AM , Rating: 5
Well the Brazilian shemale porn industry actually accounts for 80% of the country's economy, as of a 2005 economic census report. 65% of the workers in that industry are actually company execs who were convicted of tax evasion and forced to have sex changes and appear in numerous shemale porn movies ranging from, "Check my taxes", to "Wanna see my company standard?". Its quite disgusting if you ask me. That country should be invaded by the U.S. like they did to Iraq.


RE: hmmm
By Polynikes on 10/17/07, Rating: 0
RE: hmmm
By soconne on 10/17/2007 12:46:24 PM , Rating: 3
That's fine. I really don't care about rating.


RE: hmmm
By mrteddyears on 10/17/2007 1:19:17 PM , Rating: 2
John Chambers a Shemale please no dont do it :-o


RE: hmmm
By ledzp on 10/18/2007 12:10:39 PM , Rating: 1
you don't have any idea of what you're saying...
get a life, man.

seems you really like the shemale movie industry, and never saw some really good porn movies of the hottest womans in all world (brazillian woman)

stop saying shit like that and go find someone to fuck you like the shemale moves you love.


I bet they get away clean
By kileil on 10/17/2007 11:05:02 AM , Rating: 2
If the Brazilian professionals live up to their name they won't find a follicle of evidence to support this hairy accusation.




RE: I bet they get away clean
By kalak on 10/18/2007 12:15:16 PM , Rating: 2
You know NOTHING about Brasil... Iraq is your new Vietnam...
Suck this !


Export license
By jonezjoty on 10/18/2007 8:30:38 AM , Rating: 2
Do you know that Cisco can lose the US License to export its products if the US court assume they weren't compliant with the US export rules? This will make Cisco as an US only company.




RE: Export license
By darkpaw on 10/18/2007 8:37:53 AM , Rating: 2
They can, but in reality unless they are willfully shipping controlled goods to banned countires like Iran or North Korea the most probably punishment would just be a minor fine.


A Conspriracy?
By leonowski on 10/17/2007 2:09:52 PM , Rating: 3
Perhaps the Brazilian government is in cahoots with "Sisquo," the creator of the Thong Song. Sisquo has been out of popular music for some time now and is looking to get back in the game. He needs help though. Fortunately, the Brazilian government has stepped in to help promote him and his Thong Song at beaches across the country. As you all know, thongs are an important part of Brazilian beaches. This deal would have made both Sisquo and Brazil very wealthy.

Unfortunately, the deal would have fallen through if Cisco was still in town. Cisco and Sisquo have been battling it out for years. With these arrests, this paves the way for more cash and thongs for both Sisquo and Brazil. Viva Brasil!

I'm still waiting for http://www.sysco.com/ to comment on this whole situation.

For reference, please refer to:

http://www.youtube.com/watch?v=jjzkj_7_Hu8




Ciscos Response
By tdktank59 on 10/17/2007 5:45:26 PM , Rating: 2
Well my friends dad is the CSO from Cisco (not that that matters to anyone) but anyways... I found this on there website...

quote:
According to Brazilian authorities, numerous raids were conducted today in Brazil in connection with an alleged scheme to evade payment of taxes. According to official reports, the issue pertains to a group of Brazilian companies, at least one of which is a Cisco reseller in Brazil. As part of this effort, Brazilian authorities visited and temporarily closed Cisco's offices in Sao Paulo and Rio de Janiero. We understand that a small number of employees have been detained. No formal charges have been brought against these employees.

Cisco's core principles include compliance with the laws and regulations of all the countries in which it does business. We are currently in the process of establishing what exactly has happened in Brazil and determining how this investigation pertains to Cisco. We are cooperating fully with the Brazilian authorities.

Cisco's Brazilian operation is part of the Latin American region within the Emerging Markets Theater. Emerging Markets Theater sales represent approximately 10% of Cisco's overall business, and Brazil represents approximately 1% of Cisco's overall business. Cisco does not have a direct sales operation in Brazil. Rather, we sell our products through multiple 1-Tier partners. Business continues in the region through these partners.




Brazillian Warrants...
By CupCak3 on 10/17/2007 11:45:09 AM , Rating: 1
It'll be interesting to see how things go trying to serve the Brazillian warrants in the US...




Don't blame CISCO for this
By Nik00117 on 10/17/07, Rating: -1
RE: Don't blame CISCO for this
By Moishe on 10/17/2007 8:41:00 AM , Rating: 5
Even better... how about we don't automatically assume that they are guilty at all?

Arrests happen for many reasons and they are not always legal or motivated by a love of justice and law.

Until there is an end to the investigation there is no way to know who did what, when, how, etc...


RE: Don't blame CISCO for this
By mindless1 on 10/17/2007 9:37:33 PM , Rating: 3
Innocent until proven guilty is a good concept, but in this case they had the equipment shipments and didn't pay the taxes, it seems pretty clear cut.


RE: Don't blame CISCO for this
By jskirwin on 10/17/2007 9:29:14 AM , Rating: 4
Companies avoid taxes the way biological organisms avoid pain. Unfortunately complying with the laws of local governments, state/provincial governments and federal governments isn't as easy as one would expect - especially for multinationals.

I'm with you. Innocent until proven guilty.


RE: Don't blame CISCO for this
By RogueSpear on 10/17/2007 10:03:35 AM , Rating: 3
quote:
Innocent until proven guilty.

Does Brazil recognize this concept in their legal system? Anyway, I have a hard time giving benefit of the doubt when it comes to a big company following or breaking the law. Cynical perhaps, but even when they're not found "guilty" it seems that's usually the result of a mistake on the part of the prosecution.


RE: Don't blame CISCO for this
By sviola on 10/17/2007 10:50:10 AM , Rating: 2
Yes, we do recognize that one is innocent until proven guilty in our legal system (which is far more modern than the US one, and has some similarities with French, Italian and German legal systems). Any arrests here are done with a judge's order and after the prosecution's office has shown evidence of a crime. But don't worry, they'll probably get an habeas corpus in the next days.


RE: Don't blame CISCO for this
By Gul Westfale on 10/17/2007 2:56:50 PM , Rating: 5
maybe they should send them to guantanamo, prisoners in there are always guilty... even if they haven't been charged with anything. it's the gestap... i mean, american way!


RE: Don't blame CISCO for this
By odessit740 on 10/17/07, Rating: -1
RE: Don't blame CISCO for this
By Kaa on 10/17/2007 6:28:37 PM , Rating: 3
Spreading democracy and freedom around the world... XD


RE: Don't blame CISCO for this
By Gul Westfale on 10/17/2007 10:37:14 PM , Rating: 5
they are NOT prisoners of war. if they were, they would have to be brought to atrial and be treated in ahumane way in accordance with the geneva convention. for taht reason, mr bush has declared them "enemy combatants" rather than POWs and by not bringing them on US soil they do not have to be treated according to american law- essentially, they can be held in gitmo indefinitely without trial, or even accusation of a crime.

the reason i brought it ups is because cisco is a US company, and some people here appeared to be making fun of brazil's legal system.. so send the cisco people to gitmo, to let them get acquainted with the US system. that was intended as sarcasm, btw, sorry if that wasn't clear.


RE: Don't blame CISCO for this
By TLCKurovski on 10/19/2007 5:33:35 PM , Rating: 2
quote:
they are NOT prisoners of war. if they were, they would have to be brought to atrial and be treated in ahumane way in accordance with the geneva convention. for taht reason, mr bush has declared them "enemy combatants" rather than POWs and by not bringing them on US soil they do not have to be treated according to american law- essentially, they can be held in gitmo indefinitely without trial, or even accusation of a crime.

the reason i brought it ups is because cisco is a US company, and some people here appeared to be making fun of brazil's legal system.. so send the cisco people to gitmo, to let them get acquainted with the US system. that was intended as sarcasm, btw, sorry if that wasn't clear.


According to my limited knowledge, the position (it´s almost a priviledge, in fact...) of prisoner of war is limited to identified state soldiers, isn´t it?

The prisoners at Guantanamo clearly aren´t soldiers, so, at least according to moral rules, they should be judged by a... judge, right?


RE: Don't blame CISCO for this
By Treckin on 10/17/2007 2:14:54 PM , Rating: 2
Wrong! like Mexico, the Brazilian Judicial System is founded on the principals of the Napoleonic code... Guilty until proven innocent...

There are specifics though in regard to actually accusing someone. Under the Napoleonic codes, a formal accusation is a serious affair... the accused is then challenged to prove their innocence. Funnily enough, there is a distinct British Common Law practice in bringing an accusation which follows the traditional Western approach to the fidelity of the status quo.

Still, if charges are to be brought, expect that they will be very difficult to disprove, as the process leading up to arrests and allegations under a Napoleonic system are quite different and more rigorous than ours... They surely have a very strong case.


RE: Don't blame CISCO for this
By sviola on 10/17/2007 9:50:17 AM , Rating: 5
I live in Brazil, and this investigation has been going for 2 years and the arrests were done with a lot of evidence of the crime (phone recordings among them) and, according to Brazilian Federal Police, Cisco's headquarters were aware of what was going on.


RE: Don't blame CISCO for this
By Polynikes on 10/17/2007 12:46:09 PM , Rating: 2
I had a Brazilian exchange student stay in my home a couple years back, and I was very surprised to hear about the ridiculous import limitations you guys have. He wasn't allowed to bring home more than $500 (or some similar number) worth of electronics bought in the U.S. He said the technology (especially available PC tech) was way behind there, and was hoping to take home some nice PC hardware that he couldn't buy there. I thought it was pretty sad that he had a limitation like that.


RE: Don't blame CISCO for this
By edywolfy on 10/17/2007 4:51:28 PM , Rating: 2
yeah, im from brazil too and that limit its ridiculous, theres no need for that! we got no high-tech industries to protect with that tax!


RE: Don't blame CISCO for this
By killerroach on 10/17/2007 6:32:23 PM , Rating: 2
Well, a lot of those duties and import taxes are an attempt by the Brazilian government to try to stem the spread of conspicuous consumption in a country with one of the largest disparities between rich and poor in the world... that being said, these have been in place for quite some time now, and the system doesn't seem to be getting any more equitable.

Perhaps, instead of the goal of income equality, what it has done is create an obstacle to socioeconomic mobility, further promoting the status quo. You never know.

In regards to Cisco's situation, though, we'll have to see. This could be a case of a corporation playing fast and loose with the law, a business entity not completely aware of Brazil's tax codes, or a government more than eager to make an example out of a multinational high-tech company and shake them down. Any or all are possible.


RE: Don't blame CISCO for this
By jdun on 10/18/2007 5:16:10 PM , Rating: 1
Brazil and other socialist like them will always fall behind because they don't understand capitalisms. While they are trying to protect their own industries, they are in fact making them obsolete and uncompetitive. It not how big or strong you are, it how fast you can adopt to the change around you.

Socialism try to make income equality but it never works. It in fact maintain or worsen the status quo. Social mobility is very limited in a socialist state compare to a capitalist state where even the very very poor can move up rapidly and can become rich overnight.

Capitalism doesn't promise income equality or help the poor. What it does well is allow for rapidly social mobility for anyone that is willing to work hard for it. Socialism always promise equality for everyone but it is never the case. It always make things worst then it should be.


RE: Don't blame CISCO for this
By filipenko on 10/17/2007 11:04:23 AM , Rating: 1
I am so disappointed in people in rich, western countries who simply play dumb or deaf when it comes to the policies of their own companies in foreign countries.

First of all, Cisco knew local laws very well, as you can read they operated in Brasil since 1994. Many big companies have great power, especially in poor countries where they don't hesitate to corrupt officials, make all kinds of frauds etc. They can't operate like that on their domestic markets, but won't hesitate to make some dirty money, either officially, or unofficially. Quite often they make some crook local boss, and they do what they want. Poor country simply can't deal with them, either because of the inefficiency, or the fact that big companies often have more money than countries themselves. Those companies, or at least some of their leaders who use the position to make themselves rich, behave quite differently in small countries.

Surely Brasilian police didn't just spend two years investigating nothing, just to accuse Cisco simply like that. Yeah, they would spend two years in vain. It looks as if it was a thorough investigation, with a lot of evidence and stuff.

And that "innocent until proven guilty" vague speak is for the court, it is simply a technical formality, not a fact or truth. Or at least so western companies and governments say here when they accuse some locals for doing something that hurts their business, either individuals or small companies.


RE: Don't blame CISCO for this
By DEVGRU on 10/17/2007 11:44:31 AM , Rating: 3
Ooooh, I see... your going with the "the officals in our poor, small country are powerless to resist becoming corrupted by big rich companies from the west" argument. Niiice. Our turn to be disappointed.


RE: Don't blame CISCO for this
By drebo on 10/17/2007 11:45:21 AM , Rating: 3
I highly doubt that it is Cisco company policy to avoid taxes and import duties in the foreign countries in which they do business.

As you'll note from the article, several Brazilian tax officials were also arrested. This tells me that it was likely a scheme by the top executives in Brazil, not the company as a whole. Top executives work out a deal with local officials...local officials provide kick-backs, etc, to top executives...everyone makes out. Hardly what I'd call "company policy."


RE: Don't blame CISCO for this
By mrteddyears on 10/17/2007 1:14:40 PM , Rating: 1
All multi nationals have dedicated Tax departments that work on getting tax exposure down legally.

Normally the reason a company ships via another intermediate country is to mask the true buy price of the products and lower the import burden. This is a very common practise for Chinese companies masking prices via Hong Kong which is illegal in most countries.

No matter how you look at it someone in the US must have known this was happening or where very incompetent and should have picked up on the fact that Panama sales are all of a sudden shooting up through the roof.

Like it or not Cisco has been caught with its hands in the till I hope this is a one off for South America and not a norm for the rest of the world.


RE: Don't blame CISCO for this
By rudy on 10/18/2007 1:45:12 AM , Rating: 2
Who said anyone is dumb or deaf, how is it the job of the said country A to enforce the laws of country B?

And umm officials who are good cannot be corrupted if they are corrupt its not the companies fault it is their own fault or more appropriately the people who voted that official into office. Second what the heck makes you think that Cisco goes around announcing to the US public their corruption in Brazil? People in the US don't know about this junk until it makes news. Not like they released that in their quarterly statement. Hey by the way share holders due to corrupt officials in brazil we are really increasing the stock price!!!


RE: Don't blame CISCO for this
By nayy on 10/17/07, Rating: 0
RE: Don't blame CISCO for this
By Rampage on 10/17/07, Rating: 0
RE: Don't blame CISCO for this
By pugster on 10/17/2007 4:11:01 PM , Rating: 1
There's not alot of companies who don't like to do business there because of all the duties. I recall when I shipped servers to Brazil, the servers gets stuck in customs for days and local people in Brazil has to work in paying the duties and try to get the equipment back. We had some people coming from Brazil all the time and they always flew back to Brazil carrying a notebook to avoid paying duties on it.


You know what I think
By AlphaVirus on 10/17/07, Rating: -1
RE: You know what I think
By sviola on 10/17/2007 10:50:46 AM , Rating: 2
And here is a man of good taste. :)


RE: You know what I think
By drebo on 10/17/2007 10:51:45 AM , Rating: 2
Not all of them are. Go to any beach on Ipanema and you'll see just as many people that you wish never heard of the thong as you'll see people that do it justice.


RE: You know what I think
By masher2 (blog) on 10/17/2007 12:12:17 PM , Rating: 2
> "Go to any beach on Ipanema and you'll see just as many people that you wish never heard of the thong "

Yeah, but those are the tourists. :p


RE: You know what I think
By Mclendo06 on 10/17/2007 12:20:14 PM , Rating: 2
quote:
Go to any beach on Ipanema and you'll see just as many people that you wish never heard of the thong as you'll see people that do it justice.


I know exactly what you mean. When I went to visit, my hotel, just off of Ipanema, was situated right across from the gay beach. Not a pretty sight.

Talk about off topic.


RE: You know what I think
By Kaa on 10/17/2007 11:02:41 AM , Rating: 2
A mãe vai bem?


RE: You know what I think
By mrteddyears on 10/17/2007 1:17:28 PM , Rating: 1
They also play soccer like Gods


RE: You know what I think
By EntreHoras on 10/17/2007 4:25:13 PM , Rating: 2
What they do play is Futebol, Futbol, Calcio, Fussball or Football.


"I'd be pissed too, but you didn't have to go all Minority Report on his ass!" -- Jon Stewart on police raiding Gizmodo editor Jason Chen's home

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