Brazil Tax-Fraud Probe Narrows Scope, Moves on Bradesco CEO

  • Focus is down to 20 companies from 70, prosecutor says
  • Paiva says probe has very robust evidence against lender

The Brazilian federal prosecutors in charge of an investigation into tax fraud are narrowing the scope of their probe, focusing on a shorter list of alleged offenders that includes steelmaker Gerdau SA and lender Banco Bradesco SA.

Frederico Paiva, one of two Brasilia-based prosecutors driving the investigation, said the list has narrowed to 20 companies from as many as 70 a few months ago. The cases against Gerdau and Bradesco, both of which have denied wrongdoing, are the furthest along, he said. Proof against the lender is "very robust," Paiva said at a press conference Thursday after his team issued new accusations against 10 people, including Bradesco executives, for allegedly trying to influence the nation’s tax authority to evade levies.

The investigation known as Zelotes has been under way for a little over a year, picking up pace and attracting more attention in recent months after allegations were formally presented against high-ranking members of Brazil’s business elite. Bradesco Chief Executive Officer Luiz Carlos Trabuco Cappi and two other executives were accused of trying to evade taxes in May.

Police had earlier accused more than a dozen people of wrongdoing at Gerdau and questioned CEO Andre Gerdau. Gerdau has said that none of its employees has ever tried to bribe officials to influence tax rulings.

‘Slow-Moving’

Overall “we expect to have at least 30 people as defendants in the case,” Paiva said by phone from Brasilia. “We only have two prosecutors working on the case, so it’s going to be slow-moving.”

Paiva said at the press conference that Bradesco directors had meetings and long-term contact with what is considered a criminal organization by investigators. Prosecutors said Thursday that executives Luiz Carlos Angelotti and Domingos Figueiredo de Abreu were also among the accused.

In a statement sent Thursday, Bradesco reiterated that executives didn’t commit any wrongdoing and that it will prove there were no irregularities. The new accusations were reported earlier by newspaper Valor Economico.

The prosecutors have narrowed the amount of back taxes they aim to recover to 5 billion reais ($1.5 billion) from 19 billion reais, excluding fines for tax evasion, Paiva said. A lack of evidence and resources led to the decision, he said.

Other Banks

Zelotes is probing other banks including Banco Santander Brasil SA and Grupo Safra and more accusations may be made this year, prosecutors Paiva and Hebert Mesquita said at the press conference, declining to give further details. Santander Brasil said it’s not being investigated, citing a court document.

“The allegations being promoted by a Brazilian prosecutor are unfounded. There have not been any improprieties by any of the businesses of the Safra group," the company said in an e-mailed statement Thursday. "No representative of the group offered any inducement to any public official and the group did not receive any benefit in the judgment of the tribunal.”

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