JBS’ holding company, J&F, will pay leniency fines totaling $3.16 billion after the largest meatpacker in the world was found guilty of corruption. The company which is under the control of the Batista family will pay the fines over a period of 25 years beginning in December this year. As a protective measure for the minority shareholders, the fines will be paid by the holding company and not JBS, according to the firm’s new chairman, Tarek Farahat.
The fine is approximately 5.6% of the revenues that J&F generated last year. It will not be fixed, however, and will be adjusted on an annual basis to cater for inflation as measured by the IPCA inflation index of Brazil. The fine will now be the largest leniency fine levied in the world once it is adjusted for inflation.
“In absolute terms, the amount is the highest in leniency agreements already signed in Brazil and in the world,” a communique from the of Brazil’s attorney-general read.
Last year construction firm Odebrecht and its petrochemical subsidiary Braskem admitted that they paid bribes in twelve countries leading to a deal with prosecutors in Switzerland, Brazil and the United States which saw the two firms slapped with fines of $3.5 billion.
The fine imposed on J&F will be used locally in Brazil. Some of the money will go to BNDES, the development bank of Brazil. There will also be disbursements to Caiza Economica Federal, a lender and several workers and pension funds. Additionally, some money will be allocate for educational campaigns aimed at preventing corruption.
Since revelations of the corruption scandal at JBS, credit rating agencies have downgraded the company. Over 40% of the company’s market value has been lost as investors dumped the stock. Analysts are also of the view that a planned initial public offering of JBS Foods International will be put on hold.
Initially, the authorities were looking to get a higher amount from the plea bargain deal after the company admitted to paying kickbacks to politicians numbering 1,829. The former chairman of the company, Joesley Batista, even obtained a secret recording of Brazil’s President Michel Temer supposedly discussing bribes. Consequently, Temer’s government is now embroiled in a crisis.
While Temer has vigorously denied engaging in any wrongdoing, he will be questioned by the police. This has raised concerns that the scandal could sweep him out of power putting the economic reforms needed to resuscitate Brazil’s economy he has been pushing for in peril.