Commenting on the recent issue of tax investigation, Banco Bradesco SA (ADR)(NYSE:BBD) management said that they acknowledged the grievance presented by the federal public prosecutor and obtained by the federal magistrate from Brasilia regarding members of company’s management.

This is initially based on arguments given solely by the Federal public prosecutor and it restates that no legal breach or irregularities or stock tariff was practiced by Banco’s director. This fact will be fully evidenced during the initial instructions for the prosecutor. The allegations being presented by Brazilian prosecutors are baseless.

The matter

The federal prosecutors looking into tax fraud matter are narrowing the investigation scope with their focus on selected alleged offenders. This list also includes Gerdau SA (ADR)(NYSE:GGB) along with lender Banco. Frederico Paiva, the Brazilian prosecutor driving the probe, said that the list now include only 20 firms from almost 70 companies a few months earlier.

The lawsuits against Banco and Gerdau, both of which have refuted involvement in any unlawful activity, are the furthest along. Proof against the bank executives is “very robust,” for allegedly trying to impact the country’s tax authority to dodge levies.

The probe termed as Zelotes has been going on since last one year, gaining pace and getting more focus in recent months after charges were formally presented against some high-ranking executives of Brazil’s business elite.

The management view

In a statement sent last week, Banco reiterated that its executives have not committed any wrongdoing and they will show there existed no irregularities. The new charges were conveyed earlier by Valor Economico. Brazilian prosecutors have reduced the amount of taxes they plan to recover to 5 billion reais from 19 billion reais, without penalties for tax evasion. Lack of resources and evidence led to the decision. Zelotes is investigating other banks and more charges may be made in coming period.