Most of Brazil’s corruption focus over the past couple of years has been around Petrobras and the fallout from Operation Java Lito (Car Wash), which originally began as an investigation into the Brazilian state-owned energy company, but has spread to other companies and other sectors. However, there is now a second corruption scandal in Brazil that could be equally massive. It has been dubbed ”Operation Zelotes” and relates to tax evasion by not only Brazilian companies, but also multinationals doing business in Brazil.

According to an article in the Financial Times, the judicial investigation began with an anonymous tip that “accused councillors of the Administrative Council of Fiscal Resources (Carf)—a body within the finance ministry that rules on appeals over back taxes—of accepting bribes via third parties in exchange for ruling in companies' favour.” This ‘favor’ would be reduction or complete amelioration of a company’s tax bill through the full waiving of tax payments owed the national government. Brazilian prosecutors have estimated that the tax cheating was on the scale of “at least R$19bn ($5.5bn).”

There have already been high-profile arrests of such notables as Joseph Safra, Brazil’s second richest citizen and the president of Mitsubishi’s distributor and assembler in Brazil, who was convicted and given a four-year prison term. This conviction has put the spotlight on foreign companies doing business in Brazil and their use of tax advisors to help navigate the arcane and “mindboggling legal intricacies” of the Brazilian tax code. U.S. companies, which have been named in the probe include Ford and McDonalds.

The Man from FCPA has watched the Petrobras’ scandal unfold and counseled U.S. companies to get a very firm handle on their business relations in Brazil. Operation Zelotes reminds companies that professional service providers can also raise a very high FCPA risk if they are interacting with government employees, such as those in Brazil’s Carf. Moreover, every interaction with tax authorities in Brazil is subject to the retrictions of the FCPA so if your company has contested or protested tax payments in Brazil over the past 10 years, you need to review all actions your company engaged in around the transaction(s).

Both the Brazilian and U.S. governments are watching.