Brazil's Latest Scandal: Bribes, Acid and Tainted Meat Sales

  • Affected food allegedly sold in Brazil to schools, Wal-Mart
  • JBS, BRF stocks and bonds plunge after police search plants

A customer shops for meat in a supermarket in Sao Paulo, Brazil, on Friday, March 17, 2017.

Photographer: Victor Moriyama/Bloomberg

Brazilians are used to scandal and allegations of corruption, but the latest headline-grabbing police investigation has the country entering new realms that are both stomach-turning and slightly surreal.

Federal authorities announced Friday they’re investigating evidence that companies including JBS SA and BRF SA, the nation’s largest meat producers, bribed government officials to approve the sale and export of contaminated meat. Federal police served hundreds of court orders, including more than 30 detention warrants, in what local media says is the largest police operation in the country’s history.

It’s alleged that some of the meat, including sausages and cold cuts, was adulterated with ingredients including pig heads, and that suspect smells were masked by applying acid. 

Police released transcripts of recorded conversations showing how agricultural inspectors were bribed, sometimes in the form of prime cuts of beef. Those who refused to comply, it’s alleged, were reassigned elsewhere by the meat companies.

“It seems like magic realism,” Marcos Josegrei da Silva, the judge responsible for overseeing the so-called Weak Flesh investigation, said in a court order. “Unfortunately, it is not.”

School Lunches

Some of the tainted meat was sold for school meals or to retail chains including Wal-Mart Stores Inc., according to police and Brazil’s Federal Revenue agency. Some was exported -- police allege three BRF cargoes tainted with salmonella are still en route to Europe.

Wal-Mart said in a statement that it’s requested explanations from the suppliers cited by the police, and that its internal procedures on food safety are reliable.

Brazil’s Agriculture Ministry said that while the scandal revealed isolated cases, it may more broadly harm the country’s global trade reputation. Eumar Novacki, a secretary at the ministry, told journalists in Brasilia that repercussions from the case were “concerning,” as some importers may question Brazil’s overall food security system. The country is the world’s largest beef and chicken exporter, accounting for almost a fifth of global exports.

“I think long and hard before buying meat now,” Police Chief Mauricio Moscardi said in a press conference in Curitiba. “All 40 companies we investigated had issues.”

Scandal Weary

Still, the agriculture ministry said in a statement that the country’s federal meat inspection service is considered to be one of the world’s most efficient and rigorous.

Abiec, the Brazilian meat exporting group, said in an email that no beef plants from its 29 member companies, which includes JBS, were mentioned in the investigation. The cases cited by the probe are “isolated and not representative of Brazil’s large production chain,” the group said.

The police operation comes on the three-year anniversary of the country’s sweeping Carwash investigation, a massive probe into bribes that has jailed top executives at builders, prompted a complete turnaround in state-run companies, and wreaked havoc on Brazil’s political class. Both investigations originated in Curitiba, a city of about 1.7 million people in the southern state of Parana.

BRF and JBS representatives had influence in choosing the inspectors responsible for overseeing their plants and paid bribes to get clearance for their products, Moscardi said. Two executives at JBS and three at BRF are among those being investigated, along with 34 civil servants, police said.

Sao Paulo-based JBS said in a statement that it “vehemently repudiates” claims it sold spoiled food. While the company denied its executives were targeted by court orders, it confirmed three of its plants were included in Friday’s probe. BRF said in a statement that it abides by all regulations and that it’s cooperating with authorities. It didn’t comment on the allegations of salmonella-tainted exports headed to Europe.

‘Weak Flesh’

For JBS, the world’s largest meat producer, the investigation is the latest in a series of issues the company has been mired in over the past year. Its top executives were ordered to step down temporarily in September amid a probe into fraudulent investments made by pension funds, with Chief Executive Officer Wesley Batista being taken in for questioning. In July, a unit of parent company J&F Investimentos was searched in the Carwash scandal. And in January 2016, a public prosecutor accused executives including Chairman Joesley Batista, the CEO’s brother, of financial crimes.

The company and its executives have repeatedly denied wrongdoing in all the cases.

The Weak Flesh investigation and any potential repercussion on business come at a bad time for the companies. JBS is trying to sell shares in the U.S. and expand in what’s proving to be its most lucrative market, while BRF is pursuing a sale of shares in its halal unit -- a plan already in doubt after the company posted a record quarterly loss.

JBS slumped 11 percent and BRF tumbled 7.3 percent at Friday’s close in Sao Paulo, the worst performers on Brazil’s benchmark stock index. Bonds issued by both companies also dropped.

— With assistance by Samy Adghirni

    Before it's here, it's on the Bloomberg Terminal.
    LEARN MORE