Public Prosecutors and police are investigating a tax haven at CeasaMinas.

Mines 247 – Shell companies, front companies, falsified documentation. These are just some of the frauds that the Public Prosecutor's Office, the State Revenue Service, and the Civil Police hope to combat at CeasaMinas, a commercial distribution center located in Contagem, in the Metropolitan Region of Belo Horizonte.

In one decade, more than 1.000 shell companies were identified in the area, all created for the purpose of evading taxes. According to a survey by the State Finance Secretariat, the frauds have already cost the public treasury more than R$ 2 billion.

Check out the journalist's report. Pedro Rocha Franco, from the newspaper State of Minas

The well-known story of the rotten apple that spoils the bunch was formulated who knows how long ago, but it accurately portrays what happens at the CeasaMinas wholesale market in Contagem, in the Greater Belo Horizonte area, and its surroundings. The unit is identified as one of the main centers of tax evasion in Minas Gerais, and these are not isolated cases. In a decade, more than 1 shell companies and companies with other irregularities have been suspended or shut down by tax authorities, according to a survey by the State Finance Secretariat, causing losses exceeding R$ 2 billion.

The main scam uncovered is the creation of shell companies to carry out fraudulent operations, such as transferring tax credits from phantom firms to benefit legitimate companies. The fraud can involve newly created companies or those inactive for years, used to issue false documentation. As a result, business owners who receive invoices from these firms benefit from tax credits in forged transactions, thus eliminating competitors. Therefore, a little over a year ago, the Center for Operational Support to Public Prosecutor's Offices for the Defense of Economic and Tax Order (Caoet), of the Public Prosecutor's Office, coordinated by prosecutor Renato Froes, created, in partnership with the State Revenue Service and the Civil Police, a task force to combat tax evasion in the wholesale market and its surroundings. Since then, nine people have been arrested and 30 indicted for tax crimes related to Ceasa. Last year, eight other people were also arrested on suspicion of tax fraud during Operation Orange-Lime, with companies located in Ceasa (a wholesale market) linked to the scheme.

After hundreds of invoices were issued benefiting wholesalers at CeasaMinas (a wholesale market in Minas Gerais), tax authorities suspended operations of Maxsuper Indústria e Comércio Ltda. Using the identity card of Geralda da Conceição Andrade Torres, a front man managed to reactivate the company. However, given the multimillion-dollar transactions in a short period – the embezzlement from public coffers is estimated at R$ 35 million – the inspectors suspected fraud and began an investigation. When they obtained an arrest warrant for Geralda, they confirmed that she did not exist, and shortly afterward, the company, which operated in the São Salvador neighborhood of Belo Horizonte, was shut down. As a result, the authorities had to restart their work to identify the real partners. This is considered the most arduous task and is often unsuccessful, leaving the fraud uncovered. In the case of Maxsuper, it was possible to indict brothers Cláudio and Carlos Stein Pena for falsifying documents.

Another case of irregular activity allegedly involved Comercial Mult Lux Ltda. The company was supposedly run by two figureheads: Aléxis Bruno de Oliveira and Michelle Cristina de Oliveira, who, according to investigations, did not have the financial means to be the true owners. The two resided in shacks in the Vila da Paz slum. Between April and September 2010, they allegedly issued 517 invoices totaling over R$ 40 million. However, they allegedly failed to pay any amount related to the Tax on the Circulation of Goods and Services (ICMS), closing their doors that same year. The estimated loss to state public coffers is R$ 4,5 million.

A survey conducted by the State Finance Secretariat shows that, in Contagem, between 2007 and 2011, 1.093 wholesale businesses were created. During the same period, 1.042 were closed. This data confirms the high turnover rate in the sector and, according to the government, practically all of these companies are linked to the city's CeasaMinas unit. In other sectors, the ratio between businesses opened and closed is much higher. In retail, for example, 6.086 businesses were created and 3.760 closed in the city. "The turnover is much higher in the wholesale sector. It is necessary to stop the opening of companies in the names of front men and shell companies," says State Revenue auditor Djalma França.

To this end, every company that submits documentation for opening a business is immediately investigated, and any indication of irregularity in the paperwork is addressed. The Revenue Service has been closely monitoring wholesale companies that set up shop near the wholesale market – the task force's focus is not limited to Ceasa (the central wholesale market). The change in treatment is similar to that adopted by the agency in the early 2000s regarding the fuel sector. At that time, the losses caused by resellers were immense and harmed the sector. “The control is done according to the type of activity. In the case of wholesalers, the control is more rigorous. It's as if we've adopted a system similar to the customs system of the Federal Revenue Service. We have the yellow channel activated,” says the Superintendent of Inspection of the State Finance Secretariat, Anderson Félix.

The newspaper Estado de Minas contacted the administration of CeasaMinas, which stated only that the power to inspect merchants does not belong to the wholesale market, but rather to the state and federal governments. The CeasaMinas Commercial Association (Acceasa), after learning the subject of the report, did not answer further calls until the time of publication.

They live in the outskirts of cities, but claim to be responsible for companies that move millions of reais per month. Recruited by business owners, they agree to participate in enormous tax evasion networks in exchange for paltry "salaries" compared to the damage caused to public coffers. For earnings of up to R$ 5, they assume ownership of disreputable companies that flood wholesalers with fraudulent invoices, benefiting them with tax credits, and when the tax authorities come knocking, they admit to all the irregularities, but, because they have no declared assets, they end up unpunished.

The partner of a company suspected of evading R$ 7 million in taxes was identified as an electrician working for a Cemig subcontractor, even having his employment record signed by the employer. The suspect was indicted for falsifying documents and, if convicted, could face up to five years in prison. Examples like this are repeated countless times. 

Faced with the losses, the strategy adopted by anti-tax evasion agencies is to try to identify the names of the true owners of the companies. This would make it possible to take legal action against them. One difficulty is that a large part of these transactions are done in cash, which protects the data of those involved. There are cases of invoices exceeding R$ 100. If this negotiation were done by bank transfer, it would be possible to know the origin and destination of the amount.

Furthermore, the State Revenue Service has been working to cancel tax credits originating from fraudulent operations. In this case, the accumulated ICMS (Value-Added Tax) credit is reversed. These procedures are carried out with the help of professionals who are also on the list of possible members of tax evasion networks. "We try to identify accountants and lawyers linked to the network to report them to their respective councils," says State Revenue Service tax auditor Djalma França.

Initially, the strict enforcement was viewed with reservations by the merchants at the wholesale market. However, according to members of the task force, many realized that the irregular activity was causing harm to all businesses. This even led to other merchants joining the tax evasion scheme. With the fraudulent operations, those operating legally were harmed by unfair competition and, consequently, many were forced to seek fraudulent methods to keep their businesses afloat. Thus, the tendency was for all the "apples" to become contaminated. "Our goal is to fully regularize Ceasa. And we already have the collaboration of good business owners who, feeling harmed by the tax evaders, are reporting them to the task force," states prosecutor Renato Froes.