Cisco says it did not 'act inappropriately' in Brazil

Cisco says it did not “act inappropriately” after four of its employees were included in the 44 arrests made this week by federal authorities in Brazil as part of a tax-evasion investigation.

Cisco also said it does not import products directly into Brazil, but through resellers. The company said it is continuing to gather facts about the incident, in which Brazil’s Policia Federal reportedly raided Cisco offices around the country and arrested senior level executive there.

“Right now, we are working hard to better understand the details of this situation,” Cisco said in a statement released late Thursday. “Of the 44 warrants issued by the Brazilian authorities, based on the information we have only four 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.”

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.

In addition to the four arrests in Brazil, authorities also asked U.S. police to issue arrest warrants for five more suspects in the United States, according to the Reuters report.

The AP reported that Brazilian authorities had been conducting the investigation for two years, and staged raids around the country Tuesday involving 650 police and tax agents executing 93 search warrants.

Cisco said earlier this week that the investigation involved a group of Brazilian companies, at least one of which is a Cisco reseller. The company also confirmed that Brazilian authorities temporarily closed Cisco offices in Sao Paulo and Rio de Janeiro.

Brazil represents 1% of Cisco’s overall business.

The company maintains it did nothing to trigger the sting.

“In the review of the facts that we've been able to undertake, we do not believe Cisco has acted inappropriately,” the company states. “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.”