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JBS parent company, Pilgrim's reach plea deals

J&F to pay $256.5 million fine, JBS to pay $26.9 million and Pilgrim's to pay $110.5 million.

Two separate plea deals involving companies associated with JBS, the world's largest meat packing company, were announced Oct. 14.

JBS announced that its controlling shareholder, J&F Investimentos S.A. (J&F), had reached an agreement with the U.S. Department of Justice regarding violations of the U.S. Foreign Corruption Practices Act (FCPA). The charges were in connection to a probe that alleged that the company bribed Brazilian government officials as well as other companies to financially benefit J&F.

J&F pled guilty to one count of conspiracy to violate the FCPA and agreed to pay a fine of approximately $256.5 million. However, J&F is receiving a 50% credit for amounts paid to Brazilian authorities and, therefore, will be required to make a payment of approximately $128.3 million to the American authorities. JBS said it is not a party to the plea agreement and will not bear any liabilities arising from it.

“With today’s guilty plea, J&F has admitted to engaging in a long-running scheme to bribe corrupt officials in Brazil to obtain financing and other benefits for the company,” said acting assistant attorney general Brian Rabbitt of the DOJ Criminal Division. “As part of this scheme, executives at the very highest levels of the company used U.S. banks and real estate to pay tens of millions of dollars in bribes to corrupt government officials in Brazil in order to obtain hundreds of millions of dollars in financing for the company and its affiliates. Today’s resolution demonstrates the department’s continuing commitment to combating international corruption and holding companies accountable for violations of the FCPA.”

DOJ relayed that J&F admitted to conspiring with others between 2005 and 2017 to violate the FCPA by paying bribes to government officials in Brazil in order to ensure that Brazilian state-owned and state-controlled banks would enter into debt and equity financing transactions with J&F and J&F-owned entities as well as to obtain approval for a merger from a Brazilian state-owned and state-controlled pension fund.

Specifically, DOJ said between 2005 and 2014, J&F engaged in a bribery scheme involving more than $148 million in corrupt payments that were promised and made to and for the benefit of high-level Brazilian government officials, including a then-high-ranking executive at Banco Nacional de Desenvolvimento Econômico e Social (BNDES), a Brazilian state-owned and state-controlled bank. In exchange for the bribe payments, J&F was able to obtain hundreds of millions of dollars in financing from BNDES. In addition, J&F paid bribes worth more than $4.6 million to and for the benefit of a high-ranking executive of Fundação Petrobras de Seguridade Social, a state-controlled pension fund, in exchange for obtaining Petros’s approval for a significant merger that benefited J&F.

J&F also paid approximately $25 million in bribes to a high-ranking official in the legislative branch of the Brazilian government in order to secure hundreds of millions of dollars of financing from Caixa Econômica Federal, a Brazilian state-owned and state-controlled bank.

In furtherance of the bribery scheme, among other things, DOJ said J&F executives used New York-based bank accounts to facilitate the bribery scheme and to make corrupt payments, purchased and transferred a Manhattan, N.Y., apartment as a bribe and met in the U.S. to discuss and further aspects of the illegal scheme.

James Dawson, special agent in charge of the Federal Bureau of Investigation's Washington Field Office Criminal Division, said, “No matter where it occurs, the FBI and our global partners are committed to diligently rooting out corruption that betrays public trust and threatens a fair economy. Today’s plea demonstrates the FBI’s commitment to combatting foreign corruption reaching the United States, and today’s actions send a strong message that we will not relent in our efforts to uphold the law and hold everyone accountable to play by the same, fair rules.”

It was also announced that JBS and its controlling shareholders reached an agreement with the U.S. Securities & Exchange Commission (SEC) for violating U.S. securities laws, which resulted in JBS subsidiary Pilgrim's Pride Corp. failing to maintain accurate books and records and internal accounting controls.

JBS will pay nearly $27 million to SEC and is also required, for a term of three years, to review, evaluate and report to SEC on the effectiveness of the company's anticorruption policies, procedures, practices, internal accounting controls, recordkeeping and financing reporting processes for JBS and any issuers of securities in the U.S. that are under JBS's direct or indirect control.

Pilgrim's is not a party to the resolution and will not bear any liabilities arising from it, JBS noted.

“JBS and its controlling shareholder are committed to best corporate practices and close cooperation with authorities in all jurisdictions in which they operate. The agreements announced today represent an important step in their continuous efforts to improve their compliance and corporate governance programs,” Guilherme Perboyre Cavalcanti, investor relations officer for JBS, said.

In a separate deal, Pilgrim's announced that it had entered into a plea agreement with the DOJ Antitrust Division for its alleged role in a price-fixing scheme in the broiler industry.

Pilgrim's and DOJ agreed to a fine of approximately $110.5 million for restraint of competition that affected three contracts for the sale of chicken products to one U.S. customer. The company said the agreement does not recommend a monitor, any restitution or a probationary period and states that DOJ will bring no further charges against Pilgrim's in this matter, provided that the company complies with the terms and provisions of the agreement.

“Pilgrim's is committed to fair and honest competition in compliance with U.S. antitrust laws,” Pilgrim's chief executive officer Fabio Sandri said. “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.”

Pilgrim's said it plans to record the fine as a miscellaneous expense in its financial statements in the third quarter of 2020.

A total of 10 poultry company executives have been indicted, several of whom were employed by Pilgrim's. The executives were indicted by a federal district court in Colorado for their alleged roles in a conspiracy to fix prices and rig bids for broiler chicken products from at least 2012 until at least early 2019.

Defendants include former Pilgrim's CEO and president Jayson Penn; former Pilgrim's vice president Roger Austin; William Lovette, who was president and CEO at Pilgrim's during the time period but retired in March 2019; former Pilgrim's employee William Kantola, and Jimmie Little, who is also being charged for making false statements and obstruction of justice and was formerly a sales director at Pilgrim's.

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