Tainted-Meat Scandal Sends JBS Investors to Court

PHILADELPHIA (CN) — Battling charges in Brazil that it bribed food inspectors to overlook rotting chicken, meat-processing giant JBS now has a class of livid shareholders to fight.

The federal complaint filed Thursday in Philadelphia caps off what has been a bad week for the world’s largest meat processor.

JBS saw its shares drop 9.2 percent on March 17, 2017, after Reuters reported that morning its offices had been raided by Brazilian authorities following a two-year bribery investigation. In a follow-up article that night on what authorities are calling “Operation Weak Flesh,” Reuters reported that seemingly unprecedented scandal threatens $12 billion in annual exports.

Both the Associated Press and Wall Street Journal published articles on the raids as well, according to the March 22 complaint by investor Leonforte Holdings.

The articles quote investigators as having found 40 separate incidents of meatpackers bribing inspectors to overlook “unsanitary practices such as processing rotten meat and running plants with traces of salmonella.”

In some cases, according to the second Reuters article, the bribed inspectors even allowed meatpacking employees “to enter government offices, access computers and issue their own export certificates.”

The exports are believed to have been directed at markets in Europe, China and the Middle East, but the U.S. Department of Agriculture’s Food Safety and Inspection Service says its market was protected by rigorous inspection on all imported meats.

Accusing the Sao Paolo-based JBS of violating the Securities Exchange Act,, lead plaintiff Leonforte says the company misrepresented its quality control in multiple filings with the U.S. Securities and Exchange Commission.

“To ensure the quality, health and sustainability of its entire line of products, JBS has rigorous processes that permeate its entire chain of production,” the company wrote in a 2014 annual report.

“Quality is an obsession for JBS. It is a fundamental value that permeates the Company’s culture and is present in all of its production processes,” it wrote in the next year’s report.

JBS netted around $55 billion in profit in 2016.

In addition to the company, the class action names as defendants JBS CEO Wesley Mendoca Batista and Gilberto Tomazoni, the global president of its operations management team.

The class is represented by Jacob Goldberg of the Rosen Law Firm in Jenkintown, Pensylvania.

Goldberg declined to comment, and JBS spokesman Cameron Bruett  has not return a call requesting comment.

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