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Brazil’s Poultry Giant Plunges Deeper Into Crisis

Updated on
  • Police say emails from BRF employees show evidence of fraud
  • Shares slump 12% on open, drag Brazil meat companies lower

The turmoil at Brazilian poultry giant BRF SA intensified after it became the target of a new phase of the food-safety probe that threw the country’s meat industry into disarray last year.

Emails from BRF employees point to evidence of widespread fraud that reached the company’s top management, federal police said at a press conference on Monday in Curitiba. The wrongdoing allegedly occurred between 2012 and 2015, police said, and involved three of the company’s plants and executives from all levels -- a temporary arrest warrant was issued for Former Chief Executive Officer Pedro Faria, a court filing showed. A company press official contacted by Bloomberg had no comment on the probe.

The news piles pressure on BRF, which is at the center of a bitter shareholder dispute that could result in the removal of its entire board after the chicken producer reported the worst results in its history. Over the weekend, pension funds that own a combined 22 percent of the company’s shares presented their candidates for a new board. BRF Chairman Abilio Diniz has called a meeting for Monday to discuss the request.

According to a police statement, five laboratories accredited with the Agriculture Ministry and an unnamed company falsified results of tests on meat samples. The motive was to hide poor sanitary conditions and incidences of salmonella above requirements set by certain importers, avoiding sales restrictions and punishments, the ministry said in a separate statement. Exports from the plants targeted in the probe have been halted to some destinations with specific salmonella-control requirements, including the European Union, Russia, China and South Africa, the ministry said.

Eleven temporary arrest orders, 53 search orders and 27 orders to bring people in for questioning are being carried out in the states of Goias, Parana, Rio Grande do Sul, Santa Catarina and Sao Paulo, according to police’s latest statement. They named the new phase "Trapaca," Portuguese for cheating.

BRF shares slumped as much as 16 percent in Sao Paulo, touching their lowest level since 2011. Competitors also fell, with JBS SA tumbling as much as 5.3 percent and Minerva SA and Marfrig Global Foods declining 2.9 percent and 1.6 percent respectively.

Brazilian police launched their so-called Weak Flesh probe in March 2017, saying they had evidence that 21 meat companies bribed government inspectors to approve sales and exports, even when meat and poultry was contaminated or spoiled. The case prompted a number of countries to temporarily ban or curb beef and poultry imports from Brazil, the largest exporter of those commodities. The restrictions have since been lifted as some of the accusations were seen as exaggerated and as authorities increased inspections.

Tarpon Investimentos SA, an investment company that counts Pedro Faria as a founder and is one of the largest shareholders of BRF, didn’t immediately comment when contacted by Bloomberg. Local media had reported his arrest earlier Monday.

— With assistance by Felipe Saturnino

(Updates with information on former CEO arrest starting in second paragraph.)
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