Cisco’s legal problems in Brazil drag on

After he was formally charged by Brazilian authorities with tax fraud and other crimes related to the alleged evasion of US$845 million in import duties and other taxes, Cisco last week fired its former vice-president for Latin America Carlos Carnevali, Sr.

The firing is the latest in a running saga involving executives from some companies in Brazil setting up a scheme to avoid taxes and import duties to the benefit of Cisco. The scheme is reported to have been in operation for five years, as the executives imported 50 metric tons of merchandise and dodged taxes along the way. The Brazilian Federal Police spent two years investigating the scheme.

Here is a timeline starting from the initial arrests and culminating with the firing of Carnevali, Sr., who was praised in June by Cisco for growing his region by more than 35 per cent.

Cisco executives among the more than 40 arrested for alleged tax evasion

Oct. 16: At least 40 people, including Cisco’s Brazil President Pedro Ripper, are reported to have been arrested by authorities in that country for involvement in an alleged scheme to evade tax and import duties. In all, the company owes an estimated $826.4 million in taxes, fines and interest, Reuters reported.

Other online newspaper reports suggest that Cisco was among the more than 30 companies involved in the scheme, which Brazilian tax authorities believe was created by individuals to benefit the networking giant. The raid involved 650 police and tax agents carrying 93 search warrants. Goods were shipped from such tax havens as 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 reports.

Open and transparent

Oct. 19: Cisco says it did not “act inappropriately” as it emerges that four of its employees were included in the 44 arrests. Cisco also says it does not import products directly into Brazil, but through resellers. Cisco says its response to this challenge is to be “open and transparent.” Cisco says it’s not responsible for reseller misdeeds

Oct. 29: Cisco moves to further silence rumors and allegations by issuing a statement confirming its commitment to Brazil, where it has been operating since 1994 and employs 250 people. It says it “engages in appropriate fiscal planning, including adherence to tax laws and import practices,” and that resellers are required to do the same. “If fiscal fraud occurred in the companies that distribute or resell Cisco products, Cisco is not necessarily responsible for these misdeeds,” it adds.

Former Cisco Latin America VP remains in police custody

Nov. 7: Three weeks after his arrest by Brazilian authorities, Carnevali, Sr., remains in police custody along with nine other individuals arrested in the tax evasion case. Carnevali, Sr., was replaced as vice president for Latin America by Jaime Valles Valdes in June to become part of Cisco’s strategy and planning group for worldwide sales.

Cisco employees on paid leave

Nov. 15: Cisco places employees Carlos Carnevali, Jr., director of sales for Cisco’s Brazilian unit, and Sandra Tumelero on paid administrative leave. In the same news release, Cisco said it was aware of the charges made against Carnevali, Sr., and would be cooperating with the authorities and completing its own internal investigation.

No thanks for Carlos

Nov. 22: Cisco fires Carnevali Sr., after he is formally charged by Brazilian authorities. On Thanksgiving Day in the United States, Cisco issues a statement saying Carnevali, Sr.’s employment had been terminated “due to the nature of the criminal charges against him, as well as the company’s internal review, which found a failure to comply with Cisco’s Code of Business Conduct.”

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