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Senior executives of Cisco were reportedly arrested in Brazil this week in a tax fraud investigation of the company.
(Read an update on this story.)
Citing information from police and tax authorities, Reuters reported that Cisco's Brazilian unit had imported $500 million worth of telecommunications and network equipment over the last five years without properly paying import duties. In all, the company owes an estimated $826.4 million in taxes, fines and interest, Reuters reported.
Senior company executives in Brazil were among those arrested, according to the Reuters report, citing information from local law enforcement agents. Brazilian authorities also asked U.S. police to issue arrest warrants for five more suspects in the United States, according to the report.
Cisco says the situation involves a group of Brazilian companies, at least one of which is a Cisco reseller. Nonetheless, Cisco says it is cooperating with Brazilian authorities
"According to Brazilian authorities, numerous raids were conducted today in Brazil in connection with an alleged scheme to evade payment of taxes," Cisco said in a statement. "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," the company stated. "We are currently in the process of establishing what exactly has happened in Brazil and determining how this investigation pertains to Cisco."
AP reported that Brazilian authorities staged raids around the country in an effort to break up the tax evasion ring.
In raids that began Tuesday, 650 police and tax agents executed 93 search warrants and arrested 40 people involved in the alleged scheme set up by Brazilian businessmen to benefit the U.S. company, the AP reported, citing a statement from Brazil’s federal police.
Goods were shipped from tax havens like Panama, the Bahamas and the British Virgin islands to Brazilian clients to avoid local taxes, and the value of the products was underestimated, the AP report said.

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Comments (23)
from Brazillian point of viewBy from Brazil on October 30, 2007, 9:53 amHi, About the insinuations of political reasons, Cisco is also accused of giving money to the current government, so they bribed the winning side before the elections...
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Reply to BradBy Anonymous on October 27, 2007, 11:18 amWay to go Brad....Spoken like a true cisco drone
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It's a conspiracy?By Carl B. on October 22, 2007, 10:13 amCisco must be stopped... they're running an UNDERGROUND NETWORK.
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Detainees releasedBy Cisconet on October 21, 2007, 12:47 pmCisco issues statement dated Oct. 21 saying three employees detained by the Brazilian authorities have been released. No update on the fourth employee who is also...
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How can Brazil claim thatBy torqque on October 19, 2007, 7:02 pmHow can Brazil claim that Cisco owes $324 million more than the equipment it supposedly imported illegally is worth. Brazil's not corrupt. RIGHT! Our government's...
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