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Bradesco CEO Trabuco faces accusations in Brazil tax probe

A woman walks past a Banco Bradesco branch in downtown Rio de Janeiro August 14, 2014. REUTERS/Pilar Olivares (REUTERS - Tags: BUSINESS LOGO) - RTR42LZC (Reuters)

By Guillermo Parra-Bernal and Tatiana Bautzer

SAO PAULO (Reuters) - Brazil's federal police accused Banco Bradesco SA <BBDC4.SA> Chief Executive Officer Luiz Carlos Trabuco and two senior executives on Tuesday of plotting to avoid a 3 billion-real ($828 million) tax fine, the latest episode of alleged white-collar crime in Latin America's largest economy.

The office of Brazil's Prosecutor-General said that a police report seeking formal charges against Trabuco and the executives was received earlier on Tuesday. A source briefed on the matter said Chief Financial Officer Luiz Carlos Angelotti and Senior Vice President Domingos de Abreu were also named in the report.

In a statement, Bradesco vowed to fight the accusations against Trabuco in court, saying the bank had been acquitted in prior rulings. Trabuco did not participate in any meetings in which ways to eliminate the fine that Brazil's Tax Revenue Service had imposed on the bank were discussed.

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The police report "took Bradesco's management by surprise," the statement said. The three executives face accusations of influence peddling, corruption, racketeering and money laundering, the report said, without specifying which applied to Trabuco.

The accusations against Trabuco, one of Brazil's most influential power brokers, came in the midst of a sweeping corruption scandal at state firms that has rattled Brazil's political establishment and accelerated a Senate decision to put President Dilma Rousseff on impeachment trial.

Bradesco preferred shares <BBDC4.SA> slumped on the news, shedding 5 percent to 22.80 reais, the steepest decline since mid-March. Voting shares <BBDC3.SA> fell 3.7 percent, while Bradesco's American depositary receipts <BBD.N> fell 5.6 percent to $6.26 in New York.

The police investigated negotiations between Bradesco and government tax auditors over the elimination of a 3 billion-real ($828 million) fine that the country's Tax Revenue Service had imposed on the bank. The incident is part of a broader probe of fraud at the Finance Ministry's tax appeals board unveiled in March 2015.

'OPERATION ZEALOT'

The tax probe, known in Brazil as "Operation Zealot," alleges that some of Brazil's largest 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 owed.

The cases under investigation came before the CARF board between 2005 and 2013. The Zealot probe is worsening the political climate as a larger corruption scandal known as "Operation Car Wash" and a two-year-long recession are hampering the country.

Apart from Trabuco, the tax probe has ensnared other prominent executives such as André Gerdau Johannpeter, the scion and CEO of steelmaking giant Gerdau SA <GGBR4.SA> and Joseph Safra, owner of Banco Safra SA [SODEPB.UL] and reported by Forbes to be the world's richest banker.

Safra Group, the conglomerate that controls Safra's investments in banking, real estate and other segments, has repeatedly said the accusations have no basis. Gerdau has also denied wrongdoing and has vowed to cooperate with the probe.

Since taking over the top job at Bradesco late in 2008, Trabuco, 63, has presided over Bradesco's rapid growth in consumer financial services and the bank's largest acquisition ever - the $5.2 billion purchase of HSBC Holdings Plc's Brazilian unit in August.

($1 = 3.6240 Brazilian reais)

(Reporting by Guillermo Parra-Bernal; Additional reporting by Eduardo Simões in São Paulo and Marcela Ayres in Brasilia; Editing by Cynthia Osterman)