Brazilian Prosecutor Indicts McDonald’s, Opens Criminal Probe.

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SAO PAULO, Brazil – As the fight against McDonald's intensify across the globe, a federal prosecutor in Brazil has now handed down his indictment against the fast-food giant on suspected tax evasion and violations of the country's franchise and competition laws.
The indictment, linking McDonald's to its Latin American master franchise owner Arcos Dorados Holdings, will require the franchisor to appear before the federal prosecutor for a deposition, and to turn over all documents related to the case. The criminal investigation into McDonald's business practices could have major implications for how it conducts its operations around the globe, and could ignite other probes worldwide.
Legal documents claim that the two companies, McDonald's and Arcos Dorados, are "jointly responsible" for possible violations by McDonald's of Brazilian law.
If found guilty of tax dodging, fines and penalties could amount to more than $342 million. Anti-competition penalties could total 1 to 20 percent of the company's gross profits, plus an additional 10 to 50 percent of the fine against the company to its CEO. McDonald's could also be forced to pay taxes upfront rather than through quarterly payments, and it could be blocked from the use of banks in Brazil, compelling it to restructure its Brazilian operation.
Federal prosecutor Marcos Jose Gomes Correa's announcement comes on the heels of the European Commission filing an antitrust complaint against McDonald's by three Italian consumer groups, and another investigation by authorities in Europe alleging widespread tax evasion by the chain.
The latest probe will be divided into two parts, the first on economic crimes which will include violations of Brazilian franchise law, anticompetitive practices and fraudulent creation of a business group. The second will focus on fiscal crimes, including tax fraud and illegal real estate deals.
Last August, the General Workers' Union, UGT, filed its complaint asking for the Public Prosecution Service to open a civil inquiry into McDonald's alleged "illegal business practices in the country. The unions called McDonald's largest franchisee, Arcos Dourados, "recalcitrant in its breach of employer obligations in Brazil." The government responded to the petition, stating the unions allege that Arcos has structured its operations to pay fewer taxes; exercises excessive control over its franchisees, and gains an illegal uncompetitive advantages through its real estate and leasing practice. 
The investigation will probe allegations by Brazilian labor unions that Arcos paid bribes to government officials in return for favors from Brazil's tax collection regulator, as reported last Thursday by the New York Times. It said, "The investigation will also look into whether the company paid bribes to public officials in 2002 that resulted in the enactment of a new regulation that helped reduce the company's tax burden."

The General Workers' Union showed in its complaint last year that McDonald's exercises extensive control over Arcos' administrative financial, commercial and operational affairs. It adds that Arcos, in turn, extends that high level of control over franchisees in order to maximize profits, violating Brazilian law. It states, "The control goes beyond the regular objective of general franchise agreements in Brazil."

Source: Bluemaumau.org

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