Cisco Deflects Blame in Brazilian Tax Fraud Case Toward Channel, Employees Released

The release of the Cisco employees comes a few days after the San Jose, Calif.-based networking company maintained its innocence, seemingly pointing a finger at the channel for whatever wrongdoing, if any, might be uncovered in the probe.

In a statement Sunday, Cisco said three employees have been released. The company maintains that no formal charges have yet been brought against its employees and that it is doing all it can to support them.

Pedro Ripper, president of Cisco Brazil, was among the released employees. Ripper is expected to return to his role as country manager of Cisco Brazil, according to the statement.

Cisco said it is cooperating with authorities in their investigation and conducting an internal review "to understand these troubling allegations."

The release of the Cisco employees comes a few days after Cisco Thursday confirmed that four employees had been detained as Brazilian authorities carried out 44 warrants as part of their inquiry.

At that time, Cisco defended itself, noting that it only imports products into Brazil via the channel.

"In the review of the facts that we've been able to undertake, we do not believe Cisco has acted inappropriately. Key to our evaluation, we would note that Cisco does not import products directly into Brazil, but relies on resellers," the company said in a statement.

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.

A Cisco spokesman last week 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.

Investigators allege that Cisco's Brazilian unit used companies based in tax havens such as Panama, the Bahamas and the British Virgin Islands to circumvent import taxes.

According to Reuters, authorities allege that Cisco's Brazilian unit has imported $500 million worth of equipment over the last five years without paying import duties and is estimated to owe $826.4 million in taxes, fines and interest.

Brazilian authorities also asked U.S. police to issue arrest warrants for five more suspects in the United States, Reuters said.