JBS S.A. plot thickens with arrest of CEO
September 18, 2017
Brazilian police have arrested the CEO of the world's largest meatpacker, along with his brother, on suspicion of insider trading. The arrests follow an investigation, dubbed "Achilles Tendon," into the sale of JBS stock by FB Participacoes, a company owned by JBS S.A. CEO Westley Batista and his brother Joesley Batista.
According to Brazilian police, JBS purchased the stock, "manipulating the market and causing its shareholders to absorb part of the loss due to the fall in the stock's value." The arrest of the three relate to alleged insider trading in JBS shares along with unusually large gains in the company, following the purchase of dollars. A police investigator told reporters that the allegations could have more impact on the May plea deal the brothers made.
Investigators are also looking into purchases of foreign exchange futures contracts, prior to the JBS bribery scheme.
According to Brazilian authorities, the brothers profited $100 million by trading dollar-denominated futures days before the approval of their plea bargain deal, along with using FB Participações, a separate company controlled by Batistas, to sell 200 million shares of JBS stock when it was at high value, then the brothers bought the shares back when the stock price fell, according to federal prosecutors.
The plea bargain, following the much-publicized meat scandal of corruption and bribery, offered them immunity. In the agreements, the brothers testified that JBS S.A. paid bribes to numerous politicians, including Brazilian President Michel Temer. Temer denies wrongdoing.
But Brazil's Supreme Court minister revoked a portion of it, following the disclosure of an audio recording of a conversation between Joesley Batista and Ricardo Saud, director of JBS owner J&F Investimentos discussing potential criminal activities they had omitted during the plea bargain testimony, according to reports.
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Police and a representative of meatpacking giant JBS say Wesley was taken into custody in Sao Paulo on Sept. 6 And Joesley, former chairman of JBS, turned himself in on Sept. 10, along with Saud. The brothers' lawyer, Pierpaolo Bottini, called the allegations "unjust, absurd and regrettable," and said the brother's arrest was "revenge" by Brazilian public institution. The Batista brothers may face one to five years of imprisonment, plus fines, if they are proven guilty, according to the police.
Spokespeople for JBS did not have an immediate comment, but did confirm the arrest of Westley in a statement.
Analysts continue to point out that JBS S.A., and JBS U.S.A. are two separate companies, as they are separate entities and they both play by different rules.
The Brazilian leg of JBS was started in 1953 by the brother's father José Batista Sobrinho, hence the JBS, where he processed just five head of cattle per day. Today, JBS operates companies in Australia, Europe, North America and South America and sell meat to over 100 countries.
But the ongoing scandal is arguably taking its toll on U.S.A. soil, with a corporate restructuring and the brakes being put on a potential public offering. The company also began selling some of its assets, including a large Brazilian dairy company, a poultry processor in Europe and all of its cattle feedlots in the U.S. operated under Five Rivers Cattle Feeding.
According to reports, the last recorded numbers had JBS U.S.A. showing a record year. And analysts point out that most of the restructuring and sales were already in the works, prior to the Brazilian scandal.
In a June news release, JBS said it was selling the assets to "further sharpen the focus of the business on key strategic areas, protect core assets and allow the company to reduce net debt as it works on plans for future growth.
"Selling these assets is central to a strategy designed to reinforce JBS's competitive advantage in the global food industry," the release stated. "The sale of feedyard assets will more closely align the JBS business model with key U.S. competitors and allow the company to concentrate its efforts on its core food and value-added products businesses." ❖
— Eatherton is a freelance writer from Beaulah, Wyo. When she's not writing, she's riding her horse or playing with her grandson. She can be reached at email@example.com.