A Carnevali of Maracutaias? “Cisco top brass arrested in bizarre investigation”

White-collar perp walks: “The people like it that way.” The Caros Amigos cover story seems like an astute piece of political analysis.

Cisco top brass arrested in bizarre investigation: Network World‘s dedicated Cisco blogger finds the Brazilian investigation into an alleged scheme of tax evasion “bizarre.”

Likewise, when the Manhattan District Attorney indicted former São Paulo governor Paulo Maluf earlier this, Larry Rohter of the New York Times, editorializing in the news hole, said he found Morgy’s entree into foreign affairs “bizarre.” See

I thought Morgy expressed himself rather clear on why it makes sense to cooperate with foreign governments to avoid aiding and abetting massive kleptocrats:

“We are not going to become a Grand Caymans on the banks of the Hudson.”

As a New Yorker myself, I second that emotion. If I wanted to live in Paraguay — God help those poor people anyway, and best of luck to responsible adults bent on cleaning the place up — I would move to freaking Paraguay.

Cisco itself has issued a statement acknowledging a problem with its network of resellers, and said it would cooperate with Brazilian federal authorities. It noted that executives at its Brazilian subsidiary had not yet been formally charged.

It was, I thought, a very well thought-out damage-control press release.

Another detail that struck me was the Brazilian federales, at their news conference at the event, were careful to say that criminal charges, if any, will apply to individual conduct, not to the corporation — which may, however, owe some back taxes.

The New York Times notes the incident only briefly today, off the no-nonsense Dow Jones Newswires:

In a news release, Cisco said it was “cooperating fully with Brazilian authorities.” Cisco said Brazil represented approximately 1 percent of its overall business.

I was wondering about that last point: COMPUTERWORLD Brazil ran a story suggesting that the incident could produce a scandal of “Enron-like” proportions and seriously erode the CSCO share price.

Its single source: a consultant (whose clients happen to be Microsoft and Intel, though the publication does not think you need to know that in order to “consider the source”).


The whistleblower was a “disgruntled former employee,” the NW Cisco blogger emphasizes — without identifying the employee or detailing the circumstances of his or her separation.

The retribution of a fired Cisco employee has led to the seizure of a commercial jet, large sum of cash, a sizeable cache of Cisco networking equipment and the arrest of the Latin American top brass employed by Cisco.

A profile of one of the arrested executives.

Carnevali [!] joined Cisco in 1994 and has always been able to keep pace with the international growth of Cisco, managing to show results above average. An Electronic Engineer who graduated from Santos (Sao Paulo, Brazil), he holds the degree of Manager Businesses awarded by the University Mackenzie (Sao Paulo, Brazil), as well as a specialization in marketing and an MBA from Stanford University (USA).

Graduated from what university in Santos? UNISANTOS? UNIMES? UNIP Santos? FATEC?

Santos is a tough, tough town. Chicago during the Great Depression tough. Sort of a runner-up to Rio in the contest to name “the Miami of the tropical coast.” Miami in the 1980s, that is.

On the intellectual tenor of a Mackenzie University education, read some of the recent writings of its rector (who, naturally, blogs):


The absolutely bizarre consequences of this unfolding Cisco scandal are quite a contrast to the elated victory Cisco enjoyed on August 7th, when it announced 4th Quarter and Fiscal Year 2007 Earnings.

Subliterate historical analogy:

Napoleon – Emperor of France and Conqueror of Europe perhaps stated it most succinctly: “Victory is the most dangerous moment.”

What did top management know, and when did it know it?

How much of a distraction do you think this unfolding Cisco scandal will eventually become to John Chambers and Cisco’s top management?


I think the question is disingenous.

I would guess that Cisco gizmos, codebases and tips & tricks will continue to be welcome in the Tupi market, provided they pay the appropriate taxes and duties — in this case, not the worst writedown a tech company will ever have to write a check for, if they do wind up on on the hook to the Tupi tax man.

Government policies here tend to encourage big tech to give a little something back — employ local nerds, inject a little know-how and experience into the local workforce, maybe even build some gizmos here — rather than simply vacuuming the cash from gizmos that almost no one can afford to buy and learn how to use into the bank accounts of their shareholders.

Brazil wants to “own its own nose” technologically speaking. If you were them, you probably would, too. Given the erratic behavior of its principal source, the gringo Evil Empire, in recent years. Maybe if we calmed down a little, some trust could be established.

I mean, look, the U.S. ambassador here is a big-tech gazillionaire whose diplomatic experience consists of forking over vast sums of money to a political campaign. Do you think that factoid maybe fuels a little local cynicism? Maybe?

Which is I why think this development is most likely calculated to put the fear of the local orixás into the entire tech imports sector, but also that you will not hear much about it in the foreign press or from the Berkman Center for the Intel-Inside Society.

And what you do hear about it will be mostly adjective-laced (“bizarre”) gabbling nonsense.

Innovation journalism — from the school of David “Fear and Misinformation Abound” Sasaki — does not provide answers to questions, it merely poses them, breathlessly:

Could it potentially harm Cisco’s ability to create high growth in emerging markets?

Could monkeys fly out of my butt? Could aliens named John from the ninth dimension have been responsible for 9/11? Sure, to the extent that anything is possible. In (metaphysical) theory.

As I said, I think there are two takeaways to be derived from what little information we have so far on this case:

  1. You cannot provide proper adult supervision of your outsourcers and farflung overseas subsidiaries by e-mail. You need beancounting boots on the ground; and (a corollary)
  2. Be very, very careful about whom you give the keys to your brand to.

Remember that a lot of Yahoo’s reputational woes in China had to do with the fact that the “subsidiary” — really something a franchisee — it gave the keys to its brand to there was not actually controlled by the parent corporation, but was just sort of leasing it, as I understand it, in return for a share of revenues.

So I think what you are seeing here is warning shot across the bows of the entire tech import sector. Because — and this is just sort of a sense I have, but just you wait and see — conduct like this often seems to derive from the following rationale: “My competition is doing it, so if I don’t do it, I am not going to be able to compete.”

Note: in a recent poll, the federal police were found to be the most trusted governmental institution in Brazil. And I have to say I have sort of the same sense myself.

Do not underestimate these people.

They have done two extremely impressive things in recent years: (1) cleaned up their own house, implacably borking corrupt federal agents; and (2) mounted a frontal assault on the jogo do bicho and its power to corrupt public institutions.

If you do not understand the significance of (2), I think, you understand precisely nothing about efforts to eradicate official and private-sector corruption in Brazil.

It has been the practice of folks like Larry Rohter and that gang over there at the Los Angeles Times to talk trash about the Brazilian feds, as if they were just another gang of crooked and inept banana-republican federales.

(Then again, Larry Rohter thinks the “media phenomenon” of the (underaged) Internet hooker, Bruna the Little Surfer Girl, is the most important story out of Brazil in recent years.)

But believing that would be a big, big mistake, I think. Considering how underpaid and overworked these people are — they just got voted a salary adjustment, I was noticing yesterday — their professionalism and esprit de corps is astonishing.

And they have apparently learned a lot from hanging around with those Italian antimafia cops and prosecutors, too.

The scenarios are quite similar in some ways, actually — mutatis mutandis — and not accidentally, either. Thinking of Brazil as a kind of huge tropical Italy, with three-toed tree sloths and bromeliads (and gauchos and caatinga and Caribbean beaches), can take you a certain way toward grokking the situation.

The state is out to eliminate competition to its monopoly on the legitimate use of force from globalized organized crime, which has tended to treat Brazilian territory as a sort of permanent Temporary Autonomous Zone.

Efforts to reform and simplify the tax system and redistribute the tax burden fairly here presuppose formalizing the vast sector of the economy that remains off the grid, and applying a tourniquet to the throbbing flood of taxable revenue that flows offshore into fiscal paradises.

If you were these people, you would probably be doing the same thing.

See also

On maracutaias:

negócio escuso, manobra ilícita, esp. em política ou administração; traficância, fraude, falcatrua. Etimologia orig.duv.; prov. do tupi, talvez comp. de marã ‘confusão, desordem’ + ku ‘língua, órgão da fala’ + taya ‘pimenta’; pal. registradas por Teodoro Sampaio (TupGN)

Obscure dealings, illicit maneuvers, especially in politics or management; trafficking, fraud, [nogoodnik wheeling and dealing]. Origin uncertain, probably from Tupi-Guarani, as a composite of mara “confusion, disorder” + ku “tongue, faculty of speech” + taya “pepper.” First recorded by Teodoro Sampaio.

Lovely, lovely word. Not though to be related to maracatu, however, which is thought to be of Bantu origin. Even though maracatu is a dance form characterized by a certain amount of wild improvision.

Go figure.

White-collar perp walks: “The people like it that way.” The Caros Amigos cover story seems like an astute piece of political analysis.


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