(Adds BNDES comment in paragraph 8)
By Lisandra Paraguassu and Pedro Fonseca
BRASILIA/RIO DE JANEIRO May 12 Brazilian police
are investigating suspected fraud in loans to JBS SA,
the world's largest meatpacker, by state development bank BNDES,
according to federal court documents released on Friday, adding
to scandals circling the company.
The Brasilia-based court issued orders to bring in brothers
Joesley and Wesley Batista, JBS chairman and chief executive,
respectively, for questioning, according to the documents.
A JBS representative said Wesley had appeared before police
and Joesley was out of the country. In a statement the company
said all investments it received from BNDES followed laws and
regulations governing capital markets.
Common shares of JBS fell nearly 3 percent in Sao Paulo.
The court said the Batista brothers, who built their global meat
empire out of a country butchery with the help of plentiful,
state-subsidized credit, cannot make major changes to the
company until police conclude the probe.
That may freeze plans for a $1 billion initial public
offering of a food processing unit, JBS Foods International,
which was already at risk of postponement because of lukewarm
investor interest after other scandals.
The latest police probe, conducted in concert with federal
audit court TCU, comes after investigations into how JBS
obtained investments from pension funds tied to state-run firms
and whether the company participated in bribery of health
officials by Brazil's powerhouse protein industry.
JBS has denied wrongdoing in those cases as well.
Maria Silvia Bastos Marques, head of BNDES, said in a
conference call Friday that all the problems involving the bank
will be duly investigated. She declined to elaborate.
Luciano Coutinho, who presided over BNDES at the time of the
alleged irregular loans, is also implicated, the court said,
confirming remarks from a police source earlier. Coutinho is
believed to be currently outside Brazil, the police source said.
Without naming JBS, police said earlier that BNDES
subsidiary BNDES Participações had from June 2007 onward
disbursed loans to fund 8.1 billion reais ($2.6 billion) in
acquisitions of other meatpacking companies.
Police said they would detain 37 people for questioning and
execute 20 search warrants in the probe.
Investigators suspect fraud in those transactions, which
were approved with intermediation of a consultancy owned by an
unnamed lawmaker, the statement said.
According to the police source, former finance minister
Antonio Palocci owned the consulting firm. Calls to a lawyer
representing Palocci went unanswered.
($1 = 3.14 Brazilian reais)
(Reporting by Lisandra Paraguassu in Brasilia and Pedro Fonseca
in Rio de Janeiro; Additional reporting by Eduardo Simoes, Maria
Pia Palermo and Aluísio Alves in Sao Paulo; writing by Bruno
Federowski and Ana Mano; editing by Bernard Orr, Steve Orlofsky
and David Gregorio)