(Updates share performance, adds details in paragraphs 4-6)
By Ana Mano and Guillermo Parra-Bernal
SAO PAULO Dec 1 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, 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, 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.
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
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, 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
(Additional reporting by Pedro Fonseca; Editing by Dan Grebler
and Bill Trott)