Cisco 2012 Annual Report Download - page 44

Item 3. Legal Proceedings
Brazilian authorities have investigated our Brazilian subsidiary and certain of our current and former employees,
as well as a Brazilian importer of our products, and its affiliates and employees, relating to alleged evasion of
import taxes and alleged improper transactions involving the subsidiary and the importer. Brazilian tax
authorities have assessed claims against our Brazilian subsidiary based on a theory of joint liability with the
Brazilian importer for import taxes, interest, and penalties. In addition to claims asserted by the Brazilian federal
tax authorities, tax authorities from the Brazilian state of Sao Paulo have asserted similar claims on the same
legal basis. In the first quarter of fiscal 2013, the Brazilian federal tax authorities asserted an additional claim
against our Brazilian subsidiary based on a theory of joint liability with respect to an alleged underpayment of
income taxes, social taxes, interest, and penalties by a Brazilian distributor.
The asserted claims by Brazilian federal tax authorities are for calendar years 2003 through 2008 and the asserted
claims by the tax authorities from the state of Sao Paulo are for calendar years 2005 through 2007. The total
asserted claims by Brazilian state and federal tax authorities aggregate to approximately $427 million for the
alleged evasion of import and other taxes, approximately $1.0 billion for interest, and approximately $1.9 billion
for various penalties, all determined using an exchange rate as of July 28, 2012. We have completed a thorough
review of the matters and believe the asserted tax claims against us are without merit, and we are defending the
claims vigorously. While we believe there is no legal basis for our alleged liability, due to the complexities and
uncertainty surrounding the judicial process in Brazil and the nature of the claims asserting joint liability with the
importer, we are unable to determine the likelihood of an unfavorable outcome against us and are unable to
reasonably estimate a range of loss, if any. We do not expect a final judicial determination for several years.
On March 31, 2011 and April 12, 2011, purported shareholder class action lawsuits were filed in the United
States District Court for the Northern District of California against Cisco and certain of its officers and directors.
The lawsuits have been consolidated, and an amended consolidated complaint was filed on December 2, 2011.
The consolidated action is purportedly brought on behalf of purchasers of Cisco’s publicly traded securities
between February 3, 2010 and May 11, 2011. Plaintiffs allege that defendants made false and misleading
statements, purport to assert claims for violations of the federal securities laws, and seek unspecified
compensatory damages and other relief. We believe the claims are without merit and intend to defend the actions
vigorously. While we believe there is no legal basis for liability, due to the uncertainty surrounding the litigation
process, we are unable to reasonably estimate a range of loss, if any, at this time.
Beginning on April 8, 2011, a number of purported shareholder derivative lawsuits were filed in both the United
States District Court for the Northern District of California and the California Superior Court for the County of
Santa Clara against our Board of Directors and several of our officers. The federal lawsuits have been
consolidated in the Northern District of California. Plaintiffs in both the federal and state derivative actions
allege that the Board allowed certain officers to make allegedly false and misleading statements. The complaint
includes claims for violation of the federal securities laws, breach of fiduciary duties, waste of corporate assets,
unjust enrichment, and violations of the California Corporations Code. The complaint seeks compensatory
damages, disgorgement, and other relief.
In addition, we are subject to legal proceedings, claims, and litigation arising in the ordinary course of business,
including intellectual property litigation. While the outcome of these matters is currently not determinable, we do
not expect that the ultimate costs to resolve these matters will have a material adverse effect on our consolidated
financial position, results of operations, or cash flows. For additional information regarding intellectual property
litigation, see “Part I, Item 1A. Risk Factors-We may be found to infringe on intellectual property rights of
others” herein.
Item 4. Mine Safety Disclosures
Not Applicable.
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