Cisco's Brazilian Offices Raided

Cisco offices in Brazil were raided earlier this week, the result of a reported years-long tax investigation by federal authorities.

Cisco officials did not immediately return a call from Light Reading this morning, but news sources are saying Cisco is cooperating with Brazilian authorities' investigation.

Reports say 40 people were arrested; the Associated Press counts three "acting senior executives" and the former president of Cisco's Brazilian subsidiary among them.

The rest weren't necessarily Cisco employees -- the FT lists four tax inspectors and three customs agents among those arrested.

Reports say Cisco officials are cooperating with the investigation. But it is claimed that Cisco did benefit from the alleged tax-evasion scheme, which involved shipping Cisco gear to Brazil via countries like the Bahamas, the British Virgin Islands, and Panama. News reports cite Brazilian authorities who said $500 million worth of gear was involved during the last five years.

Officials reportedly seized a commercial jet and 18 vehicles along with $10 million in "merchandise" -- it's unclear whether that means Cisco equipment -- and $400,000 in Brazilian and U.S. currency.

— Craig Matsumoto, Senior Editor, Light Reading

bollocks187 12/5/2012 | 3:00:34 PM
re: Cisco's Brazilian Offices Raided I cannot beleive that Cisco made a cent from this tax evasion. What other countries is Cisco doing the same .....mmmmmm
melao 12/5/2012 | 3:00:34 PM
re: Cisco's Brazilian Offices Raided I think the biggest gain that Cisco had in this tax evasion scheme, is the edge against its competitor. Pushing down their prices down.
everythingip 12/5/2012 | 3:00:33 PM
re: Cisco's Brazilian Offices Raided this is more isolated than a trend, I have worked with folks in a number non US countries, and there are always challenges, this actually highlights an issue that a number of international companies will be facing. If Cisco was doing anything crooked in the US then I would put more emphasis on it. We tend to scrutinize everything here, just remember a few months ago a number of vendors/companies were caught backdating options...
hyperunner 12/5/2012 | 3:00:28 PM
re: Cisco's Brazilian Offices Raided ...it doesn't just apply "to non-US countries".

Enron, Worldcom, Siemens, Alcatel, BAe Systems, the Italian Government...the list of "first world" companies that have been, or are under investigation for corruption of one sort or another is very long.

I go along with the theory that the Cisco bean counters were trying to exploit a loophole in Brazilian tax law and got challenged on it.

And yes, the motives were probably to be more competitive and beat Brazil's import duties. Key questions:

- Did any of the executives benefit from this personally?

- How high up the Cisco US chain did the knowledge of this scam go? Given the sums involved you have to think that either senior US Cisco folks were involved, or Cisco really needs to get a grip on its international auditing procedures.

melao 12/5/2012 | 3:00:28 PM
re: Cisco's Brazilian Offices Raided One of the biggest challenges that companies face in Brazil is the high import taxes.
In Brazil, you would be amazed how expensive are electronic goods.

Cisco broke the law, and should pay for that. But if the Brazilian government doesn't look more closely to the importing taxes, the amount of foreign investments could decrease, and more frauds like that will appear.

I don't think that Cisco is crooked. If you dig deep, you will find similar problems in all major telecom suppliers.
paolo.franzoi 12/5/2012 | 3:00:27 PM
re: Cisco's Brazilian Offices Raided
SOX 404 would rather require these practices legal, illegal or gray (grey?) would be under control and understood as part of internal controls and auditing. Would that mean Chambers would be personally aware of this? No, but it would mean under those rules he would be accountable for it.

Pete Baldwin 12/5/2012 | 3:00:27 PM
re: Cisco's Brazilian Offices Raided Cisco's latest statement on the Brazil issue, from last night:

Heck, I'll just post the whole thing here:
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We understand that questions have been expressed about the recent Policia Federal investigation, subsequent allegations and how they may pertain to Cisco.

Cisco and its Brazilian leadership have participated from the very beginning in building the Internet in Brazil. Cisco is proud of its contribution to the Brazilian economy through its support of critical internet networks, and of our active participation in the drive toward meaningful digital inclusion in Brasil. Our ethics, integrity and compliance with the law are core to who we are as a company.

Right now, we are working hard to better understand the details of this situation. Of the 44 warrants issued by the Brazilian authorities, based on the information we have only 4 were issued to Cisco employees. Our foremost concern and focus is with our four detained employees and their families, as well as for the welfare of all our hundreds of hard-working employees who live and work throughout Brazil and the hundreds of others who help support our customers. We are doing all we can to support them through these difficult times.

In the review of the facts that we've been able to undertake, we do not believe Cisco has acted inappropriately. Key to our evaluation, we would note that Cisco does not import products directly into Brazil, but relies on resellers. We are fully cooperating with the authorities and are conducting a thorough internal review as well to understand these troubling allegations. The only appropriate response to a challenge such as this is to be open and transparent.

Until the facts are known, it would be premature and irresponsible on our part to speculate about the situation. While we work to understand the facts, we are giving full attention to the business of working closely with our partners to support and service our thousands of loyal customers in Brazil.
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