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
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.