Brazilian judge freezes Michelin assets in tax case

A Brazilian judge froze Friday some $300 million in assets owned by a former Rio de Janeiro state governor, five of his aides and French tire-maker Michelin over illegal tax breaks.

Judge Neusa Larsen ordered the freeze in the wake of a Rio court decision in October ordering the parties to reimburse the government in the amount of illegal tax breaks received beginning in 2010.

At the time, Sergio Cabral was governor of the state of Rio de Janeiro. The tax incentives were given to support the expansion of a Michelin tire plant in the city of Resende.

Larsen ordered a freeze of 1.03 billion reais ($300 million) that should have gone to the Treasury, according to a statement published Friday.

It did not specify a breakdown for Cabral, five of his former officials and the company.

According to Larsen, the tax breaks for Michelin "violated legal and constitutional precepts... that caused serious injuries to public coffers."

In addition, the illegal tax advantages "certainly contributed to the financial crisis that is devastating Rio de Janeiro state," she said.

Michelin said it would appeal.

The company insisted that the incentives were part of Rio's economic and social development fund, an effort begun in 1997 to spur investment in the state and which is currently under investigation by the authorities.

The French company noted it has been present in Brazil for decades and that all its activities are conducted "with total integrity and respect for laws and their institutions."

The court freeze comes after last week's arrest of Cabral, who governed from 2007 to 2014, on bribe-taking and money laundering charges.

Federal police swooped in on his home on November 17, an offshoot of Brazil's sprawling anti-corruption investigation codenamed operation Car Wash.

Cabral, of the PMDB party of Brazilian President Michel Temer, is charged with being part of a group that allegedly embezzled 220 million reais from public works projects, including Rio's Maracana football stadium.

Authorities are probing alleged embezzlement and bribery by some of Brazil's highest-ranking politicians in a scheme that ransacked the state oil company Petrobras.

The alleged corruption is rampant nationwide, but particularly so in Rio, a state that has hosted a series of international mega events over the past five years, notably the World Cup and this year's Rio Olympics.

Rio state is now struggling to keep afloat financially, with hospitals and emergency services running out of money. The state required a huge federal bailout on the eve of the Olympics to keep going.