“Cisco Brasil Is The Next Enron”: The Jornal do Brasil Quacks

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CSCO, DJI, and NASDAQ in recent days. If the Cisco Brasil perp-walk was felt in its share price — post hoc ergo propter hoc — then it apparently felled the entire peripherals sector — and, indeed, the entire U.S. economy.

The daily clipping service of the Brazilian Ministry of Planning reproduces an article in the Jornal do Brasil on the state of things at Cisco Systems in San Jose, California in the wake of “Operation Persona.”

The JB prints astonishingly and wholly inaccurate information about the company’s share price in the process, and gabbles in various other spectacularly stupid ways.

O quartel general da Cisco Systems em San José, na Califórnia, começa a avaliar hoje os efeitos da operação Persona no destino da empresa, que é pública e regulada pela SEC, a Securities and Exchange Commission, o órgão regulador norte-americano.

Cisco headquarters in San Jose is starting today to evaluate the effects of Operation Persona on the future of the firm, which is regulated by the SEC.

And what does the SEC have to do with Brazilian executives bribing Brazilian revenue agents, I wonder? I cannot quite imagine how it would get involved. I should probably have a better idea, having read a bit on the subject of liability over the actions of foreign subsidiaries. Then again, the JB does not seem to have a very clear idea, either. It seems to just be throwing around fuzzy references to phantom regulatory menaces here.

Em conversa com o JB em San Jose, Califórnia, o porta-voz da Cisco, John Noh, diz que a empresa ainda está “tentando entender o caso” e que, no momento, está centralizando os esforços na ajuda às famílias dos funcionários detidos, a maioria deles liberada ontem.

In a conversation with the JB in San Jose, spokesman John Noh said the company is still “trying to understand the case,” and that, at the moment, it is focusing its efforts on helping the families of employs who have been detained — most of whom were released yesterday.

The JB now reprises the official press release we saw last week, then continues:

A filial brasileira, que é acusada de sonegar cerca de R$ 1,5 bilhão em impostos, pode levar a Cisco a pagar até cinco milhões de dólares em multas e ter seus diretores, inclusive nos Estados Unidos, presos por até 20 anos, segundo a Lei Sarbanes-Oxley (criada justamente para evitar estes casos depois do escândalo da Enron, em 2001). Tudo isso apesar de o Brasil representar apenas 1% do faturamento global da companhia.

Cisco’s Brazilian subsidiary, accused of avoiding nearly R$1.5 billion in taxes, could cause Cisco to have to pay up to $5 million in fines. The case could send its executives, including in the United States, to jail for up to 20 years, according to the Sarbanes-Oxley law (created precisely to avoid such cases after the 2001 Enron scandal). All of this despite the fact that Brazil represents just 1% of its global revenues.

I heard the fed on the case say quite clearly and distinctly that individuals, not firms, will be held criminally liable for this sort of conduct. Which allegedly involved bribing federal agents. So if criminal fines are to be paid, it will not be by Cisco Systems — unless it decides to pay any eventual fines for its employees. Depending on the outcome of litigation, Cisco could be on the hook for tax and penalties owed because of actions by its employees or (more likely, outsourced, arms-length) agents, from which it (knowingly or unknowingly) benefited.

Mesmo com a pequena repercussão da operação Persona nos Estados Unidos – o noticiário limitou-se aos websites e blogs de economia e finanças – o prejuízo já se fez sentir no pregão da Nasdaq. Na sexta-feira passada, as ações da Cisco caíram 3,65%, a US$ 31.50, contra um pico de US$ 32,56 em julho deste ano.

Even though the case was little reported in the U.S. — the newsflow was limited to Web sites and economics and finance blogs — the damage made itself felt in trading on the Nasdaq. Last Friday, Cisco shares fell 3.65%, to US$31.50, down from a peak of $32.56 in July of this year.

This is simply not correct.

CSCO closed at $32.68 last Thursday, and opened at $32.45 on Friday, closing the session at $31.50. I make that a 3% fall in share price during the trading session.

The entire computer peripherals sector index fell 3% on the session.

CSCO’s 52-week high is listed at $33.60.

On July 31, it was trading at $28.91, the highest price that month.

Futhermore, the story was widely distributed to the press on the newswires. The New York Times ran it, for example. Bloomberg. CNN Money. Forbes. And so on, yada yada yada. Judging from a quick glance at Google News, the story was certainly given what major U.S. business editors decided was the proper emphasis.

If it did not make the front page with 90-pt type, well, it need not necessarily be attributed to a conspiracy of silence among U.S. business editors, but to the fact that editors generally decided that story matters some — maybe even quite a bit, as international business stories go — but just not that much. At least not yet.

You may lament this fact, but interest in spot business news tends to be proportional to the amount of money involved. It is, I agree, a somewhat hamfisted, rough and ready, way to prioritize news.

But it also makes sense. If you have ever worked on deadline, you know just how important these rules of thumbs can be to getting stuff done and still having a semblance of a life.

Skipping some of the stuff we already know.

O Brasil é o quarto escândalo no qual a Cisco está envolvida. A empresa já foi denunciada por colaborar com as autoridades chinesas na censura à internet, já pagou US$ 91,7 milhões num acordo processual em que foi acusada de maquiar balanços e, em 2003, envolveu-se numa disputa de patentes com sua maior distribuidora na China.

Brazil is the fourth scandal in which Cisco has been involved. It was accused of collaborating with Chinese authorities to censor the Internet, settled an [improper accounting] case for $91.7 million, and, in 2003, was involved in a patent dispute with its largest distributor in China.

Accused by whom? Rep. Christopher Smith of New Jersey? Rebecca McKinnon? Those people are Moonies.

Its involvement in a patent dispute is a “scandal”?

I, just some blogger, hereby accuse Cisco of enjoying barbecued human baby at its executive softball games.

Washed down with pitchers of imported beer, what’s worse, snubbing local microbreweries, throwing Bay Area brewmasters out of work, and condemning us blue-collar beer guzzlers to the monotony of a life consuming Schlitz, Blatz, Bud, Coors and Old Swill (what we called Old Milwaukee back in my college kegger days).

The Jornal do Brasil can now also report that Cisco executives have “been accused” of barbecuing and consuming babies. Inhuman bastards that they are. Damn them!

Ao redor do mundo, alguns blogs de tecnologia saíram em defesa da Cisco. O de Chris Willians, do The Register, diz que, no Brasil, os impostos sobre produtos eletrônicos chegam a 200% se comparados às taxas cobradas no varejo nos Estados Unidos. “Pior ainda, cerca de 80% dos componentes de computadores são contrabandeados, principalmente do Paraguai e de Miami. Em um país com 15 mil quilômetros de fronteiras fica difícil este controle”, diz o blog. “A Cisco somente fez o que a maioria do povo no Brasil faz. Não é a maneira certa de fazer as coisas – mas se os impostos são ridiculamente altos as coisas sempre terminam assim”, completa.

Around the world, some technology blogs defended Cisco. ..

You can stop right there.

Who gives a rat’s ass what tech bloggers think about the case?

You should not even be caring that much about what I think about the case, by the very same token.

This is a blog. You get what you pay for. I am just jotting some down notes here. I am not out there actually reporting on the case. So my opinion, if any, is going to be based on third-hand information from sources that need to be boiled thoroughly before being fit for human consumption.

If I were you, I would be carefully studying the indictments in the case and wondering about the opinion of the people whose opinions matter: Brazilian beancounters and judges.

Who are not really the banana-republican incompetents that Larry Rohter likes to imply, in the aggregate. These people can add and subtract, and realize full well that it is not the case that 2+2=5.

They tend to get pissed off when they find out that their colleagues are being bribed to look the other way, and increasingly, tend to try to do something about it.

Wouldn’t you?

One thing I can tell you, though: If you believe the Jornal do Brasil‘s coverage, you will be believing in non-existent facts. Let’s follow up and see if they do a “regret the error.”

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