Brunoro Law Blog

Tuesday, July 19, 2016

Banco Bradesco Executives Facing Criminal Charges

How is "Operation Zealot" affecting the political climate in Brazil?

Branco Bradesco SA CEO Luiz Carlos Trabuco and two senior executives are facing various charges, including influence peddling, corruption, racketeering and money laundering, in connection with a scheme to avoid a 3 billion-real tax fine. This case is another in the long list of white-collar crimes that dovetail with the corruption scandal that has led to the pending impeachment trial of former Brazilian President Dilma Rouseff.

For its part, Bradesco intends to fight the accusations, and also said it had been acquitted in prior rulings. The charges were brought after a police investigation into the negotiations between Bradesco and government tax auditors regarding the elimination of the tax fine that the country's Tax Revenue Service had levied against the bank. However, it's been reported that Trabuco was not part of those negotiations.

What is operation zealot?

The case is part of the ongoing fraud probe at the Finance Ministry's appeals board, known as CARF,  that has been in play since 2013. Code named "Operation Zealot," the tax probe is aimed at determining whether some of Brazil's largest companies bribed  CARF members in an effort to have tax fines waived or reduced.

The Zealot probe involves cases being heard before the appeals between 2005 and 2013 and is exacerbating the political climate in Brazil that has been plagued by the fall of President Rouseff and the ongoing economic recession. When the probe was initially launched, investigators estimated the state may have lost $1.8 billion in tax revenue, but that figure is likely to grow much higher when all is said and done.

Bradseco's CEO is not the only executive who has been swept up in the probe as other prominent executives have been named.  For instance, the owner of Safra Group with substantial investments in banking, real estate and other sectors, and the CEO of steelmaking giant Gerdau SA have also been named.

While it remains to be seen whether Mr. Trabuco and his colleagues will be convicted, the ongoing corruption scandal is adding to the uncertainty in Brazil and more charges are likely to surface. Given the current climate in the country's political economy, it essential to have an experienced tax attorney to help you implement risk management practices and ensure your entity is adhering to the regulations of the Tax Revenue Service.


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