Cisco Can't Vouch For Partners In Brazilian Tax Case

Cisco Systems this week said it cannot be held responsible for the actions of its channel partners as it moved again to distance itself from an alleged tax evasion scheme in Brazil.

The San Jose, Calif.-based company said in a statement Monday that while it does hire audit firms to keep tabs on its distributors, it is not responsible for any potential legal missteps those partners might make.

"If fiscal fraud occurred in the companies that distribute or resell Cisco products, Cisco is not necessarily responsible for these misdeeds," Cisco said in a statement. "While we hire highly respected audit firms to perform random audits of our distributors, no corporation engaging in an indirect sales model can directly vouch for or control every action of its distributors."

The networking vendor noted that it works with more than 55 certified channel partners in Brazil, with more than 90 percent of Cisco sales in the country flowing through the channel.

Cisco on Oct. 16 confirmed that authorities raided two of its Brazilian offices in connection with an investigation into a tax evasion scheme that involved at least one channel partner.

Cisco has said that it does not believe it has acted inappropriately in its Brazilian business activities, noting that it only imports products into Brazil via the channel.

Cisco has not had full access to the investigation being conducted by Brazilian federal police but is working to assess the situation and cooperate with authorities, according to the statement. It is also conducting an internal inquiry.

A Cisco spokesman earlier this month confirmed that Mude Comercio e Servicos, one of the vendor's Brazilian distribution partners, is one of the companies under investigation.

Cisco gave Mude its Brazilian Best Distributor Award as part of its 2007 Emerging Markets awards earlier this year. The spokesman said he could not discuss whether other channel partners are also involved in the investigation.

Last week the company said three out of four employees detained by Brazilian authorities in connection with the investigation had been released, including Pedro Ripper, president of Cisco Brazil.

Cisco counts ethics, integrity and compliance as core to its corporate identity, and requires each of its employees to sign a code of business conduct, according to Monday's statement.

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