By AP Business Writer
updated 10/28/2004 7:47:45 AM ET 2004-10-28T11:47:45

Police raided the Brazilian offices of international security consultant Kroll Inc., seizing evidence and arresting five employees amid allegations Kroll illegally spied in a probe of a bitter corporate dispute.

Two of those arrested head Kroll's Brazilian operations, the company confirmed late Wednesday.

Computers, documents and "sophisticated electronic eavesdropping equipment" were confiscated in searches of 16 offices and homes in five cities in an operation dubbed "Operation Jackal."

The searches included Kroll's Sao Paulo offices, firms that do business with Kroll and a major Brazilian Kroll client, federal police said.

Five Brazilian Kroll workers were arrested on conspiracy charges. Kroll is owned by U.S. insurance giant Marsh & McLennan Cos., which is engulfed in a scandal involving alleged bid rigging and price fixing.

The investigation began in July after Brazil's largest newspaper reported Kroll obtained copies of e-mails from a top adviser to President Luiz Inacio Lula da Silva before the adviser was appointed.

Kroll was conducting an investigation for Brasil Telecom Participacoes SA, the third largest fixed line operator in Latin America's largest country.

In raids that started Wednesday morning, police also searched the Rio de Janeiro headquarters of Brazil's Opportunity Bank and the offices of Brasil Telecom. Opportunity controls Brasil Telecom.

And they searched the homes of Brasil Telecom chief executive Carla Cico and Opportunity founder Daniel Dantas. The two were not arrested or charged, said Romero Menezes, a high-ranking federal police official.

"We are still sorting through the wealth of documents obtained in the searches," Menezes said. "More arrests could follow."

Kroll is cooperating with authorities and denies the company and its employees broke Brazilian laws, said spokeswoman Jodie Rosenbloom.

"We always act within the laws of Brazil and all of the countries in which we do business," she said.

The employees are being given legal help, and Kroll insisted there was no eavesdropping equipment in its offices. Rosenbloom confirmed that two of those arrested, Eduardo Gomide and Vander Giordano, head Kroll's Brazilian office.

Police may have found devices capable of detecting eavesdropping equipment but, the company said, while denying actual eavesropping equipment was seized.

Communications Minister Luiz Gushiken, a close Silva confident, said in July that he was spied upon before he was appointed. He called the surveillance "illegal" and said it was being investigated by Brazil's Justice Ministry.

Kroll obtained several e-mails written by Gushiken during the firm's investigation of Telecom Italia SpA for Brasil Telecom.

The e-mails were written while Gushiken was working in the private sector, before Silva took office last year. But the minister has long been an important player in Silva's Workers Party.

Kroll also obtained e-mails written by Cassio Casseb, who was also working in the private sector at the time but now heads the government-controlled Banco do Brasil, Brazil's largest bank.

Menezes said authorities found no evidence suggesting Kroll or contractors eavesdropped on any current government officials.

Kroll was hired by Brasil Telecom to come up with proof that it forced by Telecom Italia to pay too much money for the purchase of Brazilian fixed line Companhia Riograndense de Telecomunicacoes, SA, or CRT, in 2000. Telecom Italia has been fighting for years for control of Brasil Telecom.

"The allegations and the police investigation stem from an acrimonious corporate dispute between our client and another corporation," Kroll said.

Kroll, which investigates for many of the world's largest corporations, was bought by Marsh & McLennan, the largest U.S. insurance brokerage company, for $1.9 billion in July.

Marsh & McLennan chairman and chief executive Jeffrey W. Greenberg resigned Monday, after the company was accused by New York state Attorney General Eliot Spitzer of forcing businesses to pay more than necessary for property and casualty insurance.

Copyright 2004 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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