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October 28, 2007 8:51 pm

Brazil judge keeps Cisco suspects in custody

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A Brazilian judge has extended a term of temporary custody for six people connected with Cisco, the US technology giant accused of tax fraud, and imprisoned a further three people accused of involvement in the alleged scheme.

Some 40 people were arrested on October 16 after a two-year investigation involving police, public prosecutors and tax authorities. A former president and three serving senior executives of Cisco in Brazil, including its president, were held for five days. The former president was among six people retained in custody after the initial period and is among those held again on Friday.

Authorities say Cisco and its agents constructed a complex system of real and phantom companies to avoid import duties and other taxes amounting to R$1.5bn over the past five years. Cisco said it did not believe its employees had acted inappropriately and was co-operating with investigations.

In addition to Cisco executives, those arrested included employees of Cisco’s main distributor in Brazil and of companies based at a technology park in Brazil’s north-east. Also arrested were customs agents and tax inspectors.

Brazil, which is considered a key emerging market for Cisco along with Russia, India and China, accounts for about 1 per cent of Cisco’s overall business, according to the company.

Officials said that over the past five years about 50 tonnes of goods had been imported each month under the alleged scheme at a declared total value of $500m. They said initial estimates put the amount of tax evaded at about R$1.5bn.

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