SEC Resolves Brazilian Based Fraud Action

The most recent action involving foreign bribes and false books and records brought by the SEC and the DOJ centers control of Pilgrim’s Pride Corporation, a NASDAQ traded U.S. based meat company. Named as Respondents are J&F Investmentos, S.A., a Brazilian firm that served as a holding company for brothers Wesley Batista and Joesley Batista, also of Brazil, and JBS, S.A., a global meat producer based in Brazil. In the Matter of J& F Investmentos, S.A., Adm. Proc. File No. 3-20124 (October 14, 2020).

From 2009 through 2015 the brothers made illegal payments totaling about $150 million for the benefit of the Brazil Finance Minister and various political parties and candidates in Brazil at the request of the Minister. In return they got assistance in obtaining, and maintaining, $2 billion in equity financing from the Brazilian National Development and its affiliate — BNDES.

In 2009 the Batista brothers also began aggressively expanding their business in the United States meat market by making acquisitions. Part of that effort included a deal executed in December 2009 through JBS, an entity they controlled. That firm acquired 65% of Pilgrim’s shares for $800 million. The ownership stake was later increased to over 78%. Portions of the money came through BNDES.

After acquiring control of the firm, the Batista brothers, at the request of the Minister, created a series of shell companies. Those firms had bank accounts at a U.S. investment bank. The account statements were regularly made available to the Minister. Those accounts were maintained until a total of $150 million in illicit payments had been made for the benefit of various political parties and candidates in Brazil in 2014 and 2015 at the request of the Minister. Pilgrims management was unaware of the bribery scheme, although at times funds from JBS and the company were comingled.

Respondents caused Pilgrims to rely extensively on JBS management and other services. The control exercised by the Batista brothers over Pilgrims as they continued their bribery scheme resulted in the firm failing to disclose their fraudulent that scheme which ultimately undercut the internal controls of the firm: “By failing to disclose their improper relationship with the Minister and the funding of the bribery scheme, the Batistas ensured that Pilgrims internal accounting controls failed to detect and prevent their misconduct.” That also resulted in inaccurate books and records and incorrect information being supplied to the firm’s auditors.

In 2017 Joesley and Wesley Batista disclosed their role and cooperation with a widespread Brazilian corruption scheme and investigation to management of the company. Each subsequently resigned from the firm. Respondents indirectly received about $800 million in 2015 and 2016 as a result of dividends paid by Pilgrims to JBS USA. The Order alleges violations of Exchange Act Sections 13(b)(2)(A) and 13(b)(2)(B).

In resolving the matter, the Commission took into consideration the cooperation and remedial efforts of the Respondents as well as a series of undertakings that will be executed. The Commission considered, in addition, the fact that Respondent J&F entered into a plea agreement with the DOJ, acknowledging its responsibility for criminal conduct relating to the findings in the Order in U.S. v. J&F Investimentos, S.A., Crim. No. 20-CR-365 (E.D.N.Y.). The firm acknowledged responsibility for one count of conspiracy to violate the antibribery provisions of the FCPA. In May 2017, Joesley and Wesley Batista entered into collaboration agreements with the PGR in Brazil. In June 2017 J&F entered into a leniency agreement with the MPF in Brazil in which they admitted their role in widespread bribery including the conduct set forth in the Order. The brothers and J&F also agreed to pay collectively to BRI about$3.2 billion of which $768,670,358 will be disgorged to BNDES.

To resolve this matter with the Commission, Respondents consented to the entry of a cease and desist order based on the sections cited in the Order and agreed to implement certain undertakings. In addition, Respondent JBS will pay disgorgement of $26,866,565 which will be transferred to the U.S. Treasury. Respondents Joesley Batista and Wesley Batista will each pay a penalty of $550,000 that will also be paid to the Treasury.

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