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Cisco Offices Raided, Execs Arrested In Brazil
Many readers are writing in about the raids and arrests in Brazil's Cisco operation. At least 40 people were arrested earlier today, and Brazilian authorities asked the US to issue arrest warrants for five more suspects in this country. The allegation is that Cisco brought at least $500M of equipment into Brazil without properly paying import duties, and now owes over $826M in taxes, fines, and interest.
I'm shocked that it got this far. I've worked in international forwarding for over a decade, and have done more heavyweight shipments to Brazil than I can count. The laws for importation of almost ANYTHING is strict as hell. In almost all cases import duties and taxes must be paid for upfront before the shipment will be released from Brazilian customs. I have a feeling that if arrests were being made at CISCO there were also people in customs being taken down. Brazil is kind of a paradox in this regard. They have the strictest of import laws, but their system is damn corrupt. It would also not surprise me if this was nothing more than a money grab by the Brazilian government.
"Somebody in Brazil didn't get their cut of the bribe money."
I am American who set up a software company in India; a place with corruption on par with Brazil. Let me tell you how it works in places like these:
- There are laws, but they really don't mean anything.
Well, technically this isn't true. They amount to a list of things you can be charged with, should the authorities decide to make it so. In America you hire legal advice, get the proper paperwork from the government, fill out all the forms, and submit them on time with the appropriate payment; done. India and Brazil have a different system; and nobody (especially a government employee) is interested in helping you obtain the right paperwork and keep it above board. You see, *the perk* of a government job is THE BRIBE. A position in the government has a tiny salary, and your teenage kids probably earn more in babysitting. The majority of your income will be derived from bribes given by the people you serve. Americans might best understand it as a "filing fee", but without all the annoying paperwork and signatures.
This in pandemic through every part of every government office and official. From the clerk where you pay a parking ticket, the average cop on the street, all the way up to the very top of the chain. Most of these offices have forms, but filling them out is a formality; they probably won't read them, and they'll be locked away in a box and water damaged beyond recovery in a month or so. Computer backups? Ha! Yeah right. You're not going to find computers in government offices. How does that help in taking a bribe?
I am being very serious in saying all this, and I will recount two of my own true life experiences for you now:
1. I personally brought 10 computers with me into India. I was instructed by the head cop at the airport in Delhi what to write on the form (not 10 computers!), and how much to pay at the customs window. The remainder of the money went into his pocket after I handed it to one of his junior officers. (The junior officer takes the money, because the senior officer can protect him; but not vice versa.); my attorney in India estimates that after all of it, we saved $500 on the regular customs fees; which includes his own cut, for helping to arrange it.
2. I got married in India. In order to get my wedding certificate, I paid a Rs.4000/- bribe (about ~$80 USD at the time) to the clerk. It wasn't required, I could have simply shown up every day for two years until they finally got sick of dealing with me. Or, I can pay the "filing fee" and be on my way.
According to my co-worker, Brazil is really no different. Corruption is pandemic there as well. Instead of tensions between Hindus and Muslims, it's gangs that come down out of the mountains to raid the towns. (Americans thinking of traveling there might consider kidnapping insurance, as this is also not uncommon.)
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Why would Brazil hold Cisco's peons in custody? Legal hostages for bribe money; that is all.
Next time, Cisco will need to remember to pay the "filing fee". "When in Rome..." always applies, no matter where you travel on this big dirtball.
I travel to brazil pretty often because of all the family I have that lives there. The tarrifs on electronics and DVDs is a ridiculous amount like 50%. In fact, to make some cash, I know people who will come to the states and smuggle iPods back. If they get through customs, they can make a pretty penny selling them to people in Brazil. (Prices are about 2x of what they are in the states because of the import duties.
-Bucky
Anyone that has ever tried to do business in Brazil or many other developing nations are familiar with the hassles of dealing with a thoroughly corrupt system.
If you are installing some infrastructure in Brazil, you will have to pay off corrupt officials at every turn.
The biggest hassle is often toward the end of a project when you need to express ship some equipment to finish the work, and find that customs are holding onto the items awaiting a bribe. Maybe the customs officials are leaving the shipment outside in the rain to make sure you understand the importance of the bribe.
If the box you are shipping has a declared value of $100,000 you will be shaken down and hassled as infinitum as all the officials know you will and can pay a lot to get the box.
If you on the other hand ship the same box with a declared value of $50, it goes under the radar, or you may have to pay some low-level agent a few $$ to get it through.
This problem is magnified by the fact that US law does makes it illegal to pay bribes. Therefore you can not enter the item on the expense report. It is often money out of your own pocket.
So basically your choices are:
1. Do everything properly: Declare value, refuse to pay bribes (Illegal by US law), and have all your gear lost in customs for months, and very likely damaged.
2. Declare the value, and pay bribes out of your own pocket or with the assistance of your company. You have now committed a crime in the USA.
3. Declare the value low to go under the radar in the corrupt country. You have now committed a crime in the corrupt country, but hey, you can alway bribe your way out of it if you are cought.
don't cut it off www.mgmbill.org
I'm Brazilian, so if you wanna hear the REAL history: Yes, Brazil has a lot of corruption, everybody knows... But that has NOTHING to do with what happened with Cisco and a lot of other companies... Brazililian import duties are VERY HIGH, more than 100% in many cases, so Cisco (and others) were engaged in corruption schemes with the brazilian customs officials to import things paying almost none (or little) duties. I don't think cisco headquarters knew about that, that probably was something done by cisco executives in Brazil. Brazilian Federal Police is NOT corrupt (well, almost) and they REALLY work here, so they investigated this scheme for almost 2 years before charging a lot of people and arresting many... that include cisco employers, goverment custom officials and a many more... So you are right when you say Brazil has a lot of corruption, YES, that's true... But things are getting a little better year by year, and many people are being taken down... There is a lot of sensasionalism about this news, mainly because the "Cisco" is a brand everyone has heard about... but it's nothing new... almost everyday somebody is being arrested because of import fraud.