Amid Scandal, JBS Names New Chairman

Amid Scandal, JBS Names New Chairman

Ensnared in an enormous corruption scandal, Brazilian president Michel Temer has vowed to serve out his term until the 2018 election. But many doubt Temer’s confidence. “The government is hanging from a thin thread,” Jimena Blanco, head of Latin America research at Verisk Maplecroft, told the Financial Times. Brazilian's confidence in their government is diminished by the fact the latest scandal comes less than a year after former president Dilma Rousseff was impeached.

Temer’s corruption was revealed two weeks ago when Joesley Batista, the former chairman of JBS SA, the world’s largest meat packer, released a secretly recorded conversation he had with Temer allegedly discussing bribes to be paid to the Brazilian politicians including the president.

Since that revelation, Batista and his brother, CEO Wesley Batista, have resigned their positions. JBS SA announced over the weekend that Tarek Farahat was unanimously elected Chairman to replace Batista. In the same meeting, Jose Batista Sobrinho, was unanimously elected vice Chairman of the Board.

JBS SA also announced the creation of a Governance Committee, led by Farahat, whose main objective will be to implement global best practices in corporate governance and compliance at JBS.

“We will work hard to restore trust with the market and protect the more than 235,000 families that are part of JBS,” Farahat said. “There is a significant amount of work to be done in order to regain the trust of our stakeholders.”

Yet, uncertainty remains about JBS, Brazil’s second-largest nonfinancial firm by revenue. The Wall Street Journal reported that the Batista brothers struck a plea deal with authorities to avoid jail time as “the brothers and other high-level company officials admitted to paying about $150 million – mostly in bribes – to nearly 2,000 Brazilian politicians, including Brazil’s past three presidents, according to the plea deal.”

“Companies like JBS…were essentially criminal organizations with a corporate façade,” Paulo Sotero, director of the Brazil Institute at the Wilson Center told the Wall Street Journal.

Brazilian prosecutors are demanding a fine of $3.4 billion, which has investors nervous. JBS already has billions of dollars in subsidized loans. The company has experienced tremendous growth over the past decade, growing from revenue of $1.8 billion in 2006 to $49 billion last year.

JBS entered the U.S. market a decade ago with the purchase of Swift & Company. Last year JBS was the nation’s second largest beef packer with roughly $14 billion in sales. In 2009 JBS bought controlling interest in Pilgrim’s Pride, and in 2015 JBS bought Cargill Meat Solutions pork processing business.

Operating as a subsidiary of JBS USA, JBS Five Rivers Cattle Feeding LLC (Five Rivers) has a combined cattle feeding capacity of more than 980,000 head of cattle with locations in Colorado, Kansas, Oklahoma, Texas, Arizona, and Idaho.  In addition to these locations, Five Rivers (on behalf of JBS Food Canada) manages a 75,000 head capacity feedyard in Brooks, Alberta, Canada.

 

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