J&F's Bribery Settlements Highlight Compliance Breakdowns, Remediation Efforts
October 16 2020 - 5:59AM
Dow Jones News
By Mengqi Sun
Settlements between Brazil's J&F Investimentos SA and U.S.
authorities to resolve charges arising from an alleged bribery
scheme illustrate the importance of maintaining anticorruption
programs and making sure top executives undergo compliance
training.
J&F, which controls the world's largest meatpacker, JBS SA,
pleaded guilty to a criminal charge of conspiring to violate the
U.S. Foreign Corrupt Practices Act in a federal court in New York
on Wednesday. J&F agreed to pay $128 million to settle the
case.
The company admitted to paying millions of dollars in bribes to
Brazilian government officials to obtain financing and other
benefits for the company and J&F-owned entities, according to
the agreement.
Separately, JBS and controlling shareholders reached an
agreement with the Securities and Exchange Commission for alleged
violations of the FCPA involving chicken producer Pilgrim's Pride
Corp., which was acquired by JBS in 2009. JBS agreed to pay roughly
$27 million in disgorgement to settle with the SEC.
The Justice Department said J&F didn't have anticorruption
controls or a compliance program at the time of the misconduct but
credited the company with taking remedial measures since then.
J&F agreed to provide the Justice Department with reports on
compliance improvements periodically for three years.
The SEC said Colorado-based Pilgrim's, the second-largest U.S.
poultry producer, didn't enact its own code of conduct until 2015,
more than five years after it was acquired by JBS, and was still in
the process of implementing a formal antibribery compliance program
that covered its employees and consultants in 2018. Pilgrim's also
lacked compliance personnel during that period, the SEC said.
"The natural implications of this is that, without a sufficient
anticorruption program, Pilgrim's was not in a position to catch
the improper conduct that occurred," said Matteson Ellis, a lawyer
at law firm Miller & Chevalier Chartered who specializes in
international anticorruption compliance.
"Pilgrim's management was unaware of, and did not benefit from,
the cited misconduct," a spokesman for Pilgrim's said. "Pilgrim's
is not a party to the Order, nor does the Order impact or require
any changes to Pilgrim's prior financial statements or internal
control certifications."
Joesley and Wesley Batista, the billionaire brothers that
controlled J&F and JBS and later served as directors at
Pilgrim's, were also charged in the SEC case. They agreed to pay
$550,000 each to resolve the allegations.
The Batistas signed a corporate code of conduct prohibiting
bribery but neither received anticorruption or ethics training,
according to the SEC. Efforts to reach the Batistas for comment
weren't successful.
The SEC settlement underscored the regulator's expectation that
everyone, including founders and senior leaders of a company,
receive compliance training, Mr. Ellis said. "That's an interesting
message to the compliance professionals: If the most senior leaders
of the company are not included in the training, your program may
have a gap," he said.
A J&F spokesperson declined to comment. JBS said in a letter
addressed to shareholders Wednesday that it and its controlling
shareholder are committed to best corporate practices and close
cooperation with authorities in all jurisdictions in which they
operate. "The agreements announced today represent an important
step in their continuous efforts to improve their compliance and
corporate governance programs," JBS said.
The SEC noted remediation efforts, including the creation of a
compliance program that employs about 35 people at J&F and its
affiliates to cover operating entities including Pilgrim's,
updating its code of conduct, creating antibribery policies and
training programs, and removing executives involved in alleged
corruption in Brazil.
J&F plans to create a compliance committee, hire auditors to
conduct due diligence of suppliers and customers, and provide more
than 120 directors at J&F and its affiliates training on the
areas of conflicts of interest, money-laundering prevention and
anticorruption, according to the SEC order.
Write to Mengqi Sun at mengqi.sun@wsj.com
(END) Dow Jones Newswires
October 16, 2020 05:44 ET (09:44 GMT)
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