Feds, JBS Owners Reach Pleas

OMAHA (DTN) -- It's been a busy day in federal courts for JBS SA, its Brazilian owners and its poultry subsidiary, Pilgrim's Pride, as the meatpacking conglomerate was ordered to pay a combined $393 million in fines in two separate federal court cases.

In the first case, out of the U.S. District Court for Eastern New York, in Brooklyn, J&F Investimentos SA, the major owners of JBS SA and Pilgrim's Pride, pleaded guilty to violating federal bribery laws -- under the Foreign Corrupt Practices Act -- by bribing officials at Brazilian state-owned banks, and agreed to pay a fine of $256 million. According to the U.S. attorney for the federal court in Brooklyn, J&F Investimentos used certain employees and connections "to pay millions in bribes to Brazilian government officials, through, among other means, bank accounts based in New York."

J&F Investimentos is 100% owned by Joesley and Wesley Batista, brothers who also admitted in Brazilian courts to bribing as many as 1,800 officials to receive $1.3 billion in loans from Brazilian-government banks and pensions. J&F used its New York-based banks to create shell companies "to make hundreds of millions of dollars in corrupt payments for the benefit of Brazilian officials."

Starting in 2007, JBS made major moves into the U.S, buying Swift & Co., for $1.5 billion. JBS then bought Pilgrim's Pride in 2009. The funds J&F received were used to help buy Pilgrim's Pride. Among the fines J&F agreed to pay was $27 million to the Securities and Exchange Commission to settle charges against the company for illegally obtaining money to buy Pilgrim's Pride.

"Engaging in bribery to finance their expansion into the U.S. markets and then continuing to engage in bribery while occupying senior board positions at Pilgrim's reflects a profound failure to exercise good corporate governance," said Charles Cain, chief of the SEC enforcement division's FCPA Unit. "This brazen misconduct flies in the face of what investors should expect from those occupying the role of an officer or director of a U.S. issuer."

While paying $292 million for illegally bribing Brazilian officials to help JBS expand, including into U.S. businesses, the plea deal does not require any divestiture of any JBS SA assets in the United States.

Collectively, JBS SA is the second-largest U.S. packer in beef, pork and poultry. JBS SA reported $610 million in net income on $12.1 billion in revenue for the second quarter of 2020, reported in August.

In Colorado, Pilgrim's Pride on Wednesday also agreed to settle price-fixing charges on poultry contracts, agreeing to pay a $110.5 million fine. The contracts ended up leading to higher costs for restaurants, grocery stores and consumers. Pilgrim's Pride stated the plea agreement, which must be approved by the U.S. District Court in Colorado, involved three contracts for the sale of chicken products to one customer, Pilgrim's Pride stated.

"Pilgrim's is committed to fair and honest competition in compliance with U.S. antitrust laws," said Fabio Sandri, Pilgrim's CEO. "We are encouraged that today's agreement concludes the Antitrust Division's investigation into Pilgrim's, providing certainty regarding this matter to our team members, suppliers, customers and shareholders."

Chris Clayton can be reached at Chris.Clayton@dtn.com

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