Brazil targets Itaú as tax probe reaches more banks (updated)

Banco Bradesco

01/12/2016 20:35

(Updates share performance, adds details in paragraphs 4-6) 
    By Ana Mano and Guillermo Parra-Bernal 
    SAO PAULO, Dec 1 (Reuters) - Brazilian police investigating 
alleged bribery of tax officials on Thursday raided Itaú 
Unibanco Holding SA, the latest banking giant to be swept up in 
the widening investigation. 
    Earlier in the day, federal police executed 34 search 
warrants and took testimony from 13 people in three Brazilian 
states. Police did not name the bank involved in the phase of 
the so-called Operation Zealot but Itaú, Latin America's No. 1 
bank by market value, confirmed it was the target.  
    The investigation centers on allegations that dozens of 
companies bribed members of the CARF, a Finance Ministry body 
that hears appeals on tax disputes, to get favorable rulings 
that reduced or waived the amounts they owed. 
    Preferred shares  ITUB4.SA , Itaú's most widely traded class 
of stock, fell as much as 4.5 percent on Thursday, the steepest 
decline in three weeks. As a result, Brazil's Bovespa stock 
index - in which Itaú is the most heavily weighted stock - 
declined the most since early February. 
    The probe is part of a worsening political climate in 
Brazil, where a larger corruption scandal ensnaring a number of 
state-controlled firms, contractors and dozens of politicians 
has hampered business confidence and impeded efforts to pull the 
economy from a two-year recession. 
    Apart from Sao Paulo-based Itaú, the tax investigation has 
targeted peers including Banco Bradesco SA  BBDC4.SA , a money 
management firm controlled by billionaire Joseph Safra's Safra 
Group and Banco Santander Brasil SA. Bradesco and Santander 
Brasil have denied wrongdoing, while the Safra Group has 
repeatedly said the accusations lack any basis. urn:newsml:reuters.com:*:nL1N18S1NK 
     
    MANIPULATION 
    In a statement, the police said there is evidence that a 
CARF councilor and Itaú teamed up with legal and financial 
advisers to manipulate tax disputes between 2006 and 2015. The 
manipulation "of administrative procedures took place" at least 
three times during that period, the statement said. 
    Itaú said the searches related to tax disputes involving the 
local unit of FleetBoston Corp, which the Brazilian lender 
bought a decade ago. The wrongdoing was allegedly related to 
business conducted by BankBoston, as FleetCorp's brand was then 
known. 
    According to Itaú's statement, the BankBoston acquisition 
did not entail the transfer of tax cases, which it said are the 
responsibility of Bank of America Corp  BAC.N , the ultimate 
buyer of FleetBoston.  
    In a separate statement, Bank of America said it is 
providing Brazilian authorities with the necessary documentation 
for the investigation. 
    Operation Zealot has not only implicated some of Brazil's 
most influential firms but also some of the nation's foremost 
power brokers. Luiz Carlos Trabuco, Bradesco's chief executive 
officer, has been accused alongside three of the bank's main 
executives. 
 
 (Additional reporting by Pedro Fonseca; Editing by Dan Grebler 
and Bill Trott) 
 ((ana.mano@thomsonreuters.com; +55-11-5644-7704, 
+55-119-4470-4529; Reuters Messaging: 
ana.mano.thomsonreuters.com@reuters.net)) 
 
Keywords: BRAZIL CORRUPTION/ITAU UNIBCO HLDG