Meat+Poultry - December 2017 - 27

I

n 2011, Joesley Batista and his brother,
Wesley, were at the top of the family meat
processing business, São Paulo, Brazilbased JBS SA. Joesley Batista was chairman
and Wesley Mendonça Batista would find
himself in the driver's seat as the company's
new president and CEO.
But nearly seven years later, the brothers
are imprisoned in a São Paulo penitentiary
awaiting trial on charges of insider trading.
Their father, José Batista Sobrinho, reprised
his role as president of the meat processing
company he founded, and Jeremiah
O'Callaghan, who joined the company as
investor relations officer, was promoted to
chairman of the board.

© 2017 Bloomberg Finance LP

GROWING PROTEIN POWERHOUSE
Scandal, recriminations and incarceration were
not in the Batista brothers' business plans -
growth was the goal at JBS SA.
In 2013, the company announced plans to
acquire Seara Brasil, a poultry producer formerly
owned by Marfrig Alimentos, for $2.5 billion.
In 2014, the company acquired Primo
Smallgoods Group, a leading producer of
ham, bacon and smallgoods in Australia and
New Zealand, for $1.25 billion. That same
year saw "Operation Lava Jato," or "Operation
Car Wash," break wide open. Federal
prosecutors and police had launched a criminal
investigation that uncovered an ever-widening
web of corruption involving Brazilian
government and businesses. The media in
Brazil pointed a finger at JBS for payments
made to a company caught up in the probe,
but the meatpacker denied any involvement in
criminal activity.
Cargill's US-based pork business was
JBS's next target in 2015. Wesley Batista said
at the time that JBS had been interested in
Cargill's pork business for several years. Cargill
eventually agreed to sell in a transaction valued
at $1.45 billion.
By 2016, the company prepared to expand
further into global markets and embarked
on a dramatic reorganization aimed at
raising its profile in the investor community
and improving access to capital markets.

Executives filed registration statements with
the US Securities and Exchange Commission
to launch an initial public offering that would
create JBS Foods International, a publicly
traded company listed on the New York Stock
Exchange under the symbol "JBS."
"Through strategic acquisition in new
geographies, primarily in the United States,
Australia, Brazil and Europe, we have created
a diversified global platform that allows us to
prepare, package and deliver fresh, processed
and value-added beef, poultry, pork, lamb and
sheep products and animal byproducts from our
facilities located around the world," JBS said.

THINGS FALL APART
But signs of trouble emerged months before
JBS announced plans for an IPO and an
international spin-off business.
Joesley Batista was indicted for allegedly
violating Brazilian law prohibiting loans from
one financial entity to its owners. Prosecutors
alleged that in December 2011, Banco Rural
lent 80 million reis to a pair of companies
controlled by J&F Investimentos SA, JBS's
parent company which was led by Joesley.
The companies deposited the money in J&F's
financial unit, which then lent the money back
to Banco Rural's parent company, Trapezio SA.
Such "triangular transactions" are prohibited
under Brazilian law. Several other executives
also were named in the indictment.

"...we had
no idea how
much it would
affect our
lives, the lives
of our families
and our
children."
- WESLEY BATISTA

OPERATION WEAK FLESH
From 2016 through 2017, the Batista
name became linked to multiple criminal
investigations stemming from that initial
blockbuster Operation Car Wash probe. One
such investigation was "Operation Weak
Flesh" which exposed bribes paid to food
safety inspectors in Brazil. The situation only
worsened for JBS and the Batistas.
In March, the Federal Police in Brazil
raided the facilities of dozens of meatpackers,
including JBS SA and BRF SA, as part of a
two-year criminal investigation which found at
least 40 cases of federal regulators accepting
bribes in exchange for loosening regulations
and helping food processors put adulterated

The legal problems facing
Joesley Batista (pictured)
and his brother Wesley
raise questions about the
future of JBS SA, the world's
largest meat packer.

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