(Updates share performance, adds details in paragraphs 4-6)
By Ana Mano and Guillermo Parra-Bernal
SAO PAULO, Dec 1 (Reuters) - Brazilian police investigating alleged bribery of tax officials on Thursday raided Itaú Unibanco Holding SA, the latest banking giant to be swept up in the widening investigation.
Earlier in the day, federal police executed 34 search warrants and took testimony from 13 people in three Brazilian states. Police did not name the bank involved in the phase of the so-called Operation Zealot but Itaú, Latin America's No. 1 bank by market value, confirmed it was the target.
The investigation centers on allegations that dozens of companies bribed members of the CARF, a Finance Ministry body that hears appeals on tax disputes, to get favorable rulings that reduced or waived the amounts they owed.
Preferred shares, Itaú's most widely traded class of stock, fell as much as 4.5 percent on Thursday, the steepest decline in three weeks. As a result, Brazil's Bovespa stock index - in which Itaú is the most heavily weighted stock - declined the most since early February.
The probe is part of a worsening political climate in Brazil, where a larger corruption scandal ensnaring a number of state-controlled firms, contractors and dozens of politicians has hampered business confidence and impeded efforts to pull the economy from a two-year recession.
Apart from Sao Paulo-based Itaú, the tax investigation has targeted peers including Banco Bradesco SA, a money management firm controlled by billionaire Joseph Safra's Safra Group and Banco Santander Brasil SA. Bradesco and Santander Brasil have denied wrongdoing, while the Safra Group has repeatedly said the accusations lack any basis.
In a statement, the police said there is evidence that a CARF councilor and Itaú teamed up with legal and financial advisers to manipulate tax disputes between 2006 and 2015. The manipulation "of administrative procedures took place" at least three times during that period, the statement said.
Itaú said the searches related to tax disputes involving the local unit of FleetBoston Corp, which the Brazilian lender bought a decade ago. The wrongdoing was allegedly related to business conducted by BankBoston, as FleetCorp's brand was then known.
According to Itaú's statement, the BankBoston acquisition did not entail the transfer of tax cases, which it said are the responsibility of Bank of America Corp, the ultimate buyer of FleetBoston.
In a separate statement, Bank of America said it is providing Brazilian authorities with the necessary documentation for the investigation.
Operation Zealot has not only implicated some of Brazil's most influential firms but also some of the nation's foremost power brokers. Luiz Carlos Trabuco, Bradesco's chief executive officer, has been accused alongside three of the bank's main executives. (Additional reporting by Pedro Fonseca; Editing by Dan Grebler and Bill Trott)