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Update: Cisco execs in Brazil among group arrest for tax fraud

Failure to pay import duties on $500M in networking gear among charges, reports say

October 17, 2007 12:00 PM ET

Computerworld - Brazilian police have arrested 40 or more people, including Cisco Systems Inc. senior executives there, in a tax fraud investigation, according to reports.

Reuters and the Associated Press said the arrests by tax authorities and police occurred yesterday. The Reuters report adds that Cisco's Brazilian unit had imported $500 million worth of networking equipment over five years without paying import duties and that Cisco owes more than $800 million in taxes, fines and interest.

Cisco has posted a statement on its Web site regarding the incident.

The statement quotes Brazilian authorities who said they conducted "numerous raids [Tuesday] in Brazil in connection with an alleged scheme to evade taxes." Cisco notes that one of the companies raided was a Cisco reseller, which led to authorities temporarily closing Cisco's offices in Sao Paulo and Rio de Janiero.

A "small number" of Cisco employees were detained, but were not formally charged, the statement said. A Cisco spokesman said he did not have the names of the executives who were detained.

The statement adds that Cisco officials are trying to determine what happened, and that Cisco is cooperating with authorities. Cisco has no direct sales in Brazil, although it uses top-tier partners to resell products. Sales in Brazil account for about 1% of all Cisco revenues.

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