Former Mataboi Alimentos owners to file corruption lawsuit against meat processing giant JBS

22 December 2017 6:14pm
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21 December 2017. By Rodrigo Russo.

The former owners of Brazilian meat producer Mataboi Alimentos plan to file a damages lawsuit against JBS, one of the largest meat processing companies in the world, MLex has learned.

This will be the first damages lawsuit directly related to information offered by defendants in the Lava Jato scandal as part of plea agreements with the Federal Prosecutors’ Office. The case could set an important precedent for other firms and investors who believe they were harmed by companies and executives who have admitted wrongdoing in leniency agreements.

In May, brothers Joesley and Wesley Batista — at that time CEO and president of JBS, respectively — signed plea agreements with federal prosecutors in the context of the Lava Jato investigations, which involve corruption at state-controlled oil company Petróleo Brasileiro, or Petrobras.

The key piece of evidence delivered by Joesley Batista to prosecutors implicated Brazil President Michel Temer in alleged payments to former lawmaker Eduardo Cunha. The payments were allegedly made by Batista, with Temer’s consent, to keep Cunha from signing a plea agreement that could widen the scope of the probes. Cunha has been arrested and convicted as a result of a Lava Jato investigation targeting his role in a dodgy Petrobras purchase of an oil field in Benin.

The plea agreements also shed light on multiple bribery schemes between JBS executives and high-level politicians at the federal and state levels, including illegal payments to secure funding at low rates from the Brazilian National Economic and Social Development Bank, or BNDES. The investment branch of the bank invested 8 billion reais ($2.43 billion) in JBS from 2007 to 2011 as part of a plan to transform the company into one of the biggest meat producers in the world.

Executives at the federal bank Caixa Econômica Federal were also bribed to offer JBS sweetened conditions on loans the issuance of debentures, according to information disclosed by the Batista brothers.

Within this context, JBS grew massively from 2006 to 2016, in part through big national and international acquisitions — including the American companies Swift and Pilgrim’s Pride. Its revenues jumped from 4 billion reais ($1.215 billion) to 170 billion reais ($51.6 billion).

The intense pressure of competing with JBS — given the unfair support the company allegedly received — harmed smaller players in Brazil, such as Mataboi. The corruption acknowledged this year by JBS executives provides the legal grounds for the damages lawsuit that Mataboi's former owners intend to file.

Mataboi filed for bankruptcy in 2011. Three years later, in December 2014, it was purchased by JBJ Agropecuária, a company that bears no official relation with JBS, but which is owned by a brother of Wesley and Joesley Batista. José Batista Junior was part of the JBS board until 2013, when he left the company.

Mataboi had three years from the date of the purchase to file a civil complaint related to any aspect of the transaction, but last week, the former owners received a three-year extension from a court in the state of São Paulo.

In the filing to the court seen by MLex, lawyers for the former Mataboi owners say that many other meat producers were under the same financial pressure that led to the sale of Mataboi to JBJ.

“The coincidence wasn’t random: with the plea agreements of Mrs. Joesley Batista and Wesley Batista, the public became aware of a series of anticompetitive acts practiced by JBS with the main — and unfortunately successful — goal of leading rivals to insolvency. The damages caused to those that tried to compete with JBS in the animal protein market, the exact situation of Mataboi, were very high," the lawyers told the court.*

MLex understands the former Mataboi owners plan to file suit early next year.

JBJ Agropecuária is appealing a court ruling that upheld the Brazilian antitrust agency’s order to undo the Mataboi merger. In October, the Administrative Council for Economic Defense said Mataboi’s acquisition by JBJ led to high concentration in the cattle-slaughtering market in Goiás state and the fresh beef market in Brazil.

*MLex translation of Portuguese documents.

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