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Senators seek probe into JBS transactions

Article-Senators seek probe into JBS transactions

JBS Purchases Canadas XL Foods
Sens. Rubio and Menendez say increasing foreign investment in domestic food system "demands additional scrutiny."

Over the last 12 years, Brazil-based JBS S.A. has become increasingly active in the American food sector. However, as the conglomerate moved into the U.S. market, it engaged in illicit financial activities and suborned Brazilian government officials to secure the loans used for its investments in the U.S., leading two bipartisan leaders of the Senate Foreign Relations Committee to seek an open review of JBS S.A.

In a letter to Treasury Secretary Steven Mnuchin, Sen. Bob Menendez (D., N.J.), who serves as ranking member of the committee, and Sen. Marco Rubio (R., Fla.), chairman of the Senate foreign relations subcommittee on the Western Hemisphere, requested that the Committee on Foreign Investment in the United States (CFIUS) formally open a review of the transactions.

“Given its admitted criminal conduct to secure loans that were used for investment in the United States and the group’s business relationships with Venezuela’s [President Nicolas] Maduro regime, as well as its growing reliance on financing from entities aligned with the Chinese government, we ask that CFIUS conduct a review of JBS S.A.’s acquisition of U.S. companies,” Menendez and Rubio wrote. “The growing trend of foreign investment in our food system demands increased attention and scrutiny in order to safeguard our nation’s food supply.”

In 2007, JBS S.A. established a U.S. subsidiary — JBS USA — which purchased the American beef and pork processing company Swift Foods Co. Through a deal in 2008, JBS USA acquired the beef processing operations of Smithfield Foods. In 2009, JBS USA scooped up the majority of the poultry processing operations of Pilgrim’s Pride. Additionally, JBS USA purchased Cargill’s pork processing operations in 2015. Today, JBS S.A. is the world’s largest meat processing company and has major holdings across the U.S. food sector. “These acquisitions have serious implications for the security, safety and resiliency of our food system,” the letter explained.

In 2017, J&F Investimentos, which owns more than 40% of JBS S.A., reached a settlement to pay a $3.2 billion fine for its role in an expansive bribery scandal in Brazil. In advance of this settlement, J&F Investimentos’ owners Joesley and Wesley Batista — the sons of JBS S.A. founder José Batista Sobrinho — admitted to bribing more than 1,800 Brazilian politicians in amounts totaling more than $150 million in order to illicitly acquire loans and financing from the Brazilian Development Bank (BNDES) and several Brazilian pension funds.

“We are troubled that JBS S.A. used the ill-gotten financing that it received from BNDES, which totaled more than $1.3 billion, to acquire American companies. It has been reported that the Department of Justice has opened an investigation on J&F Investimentos for potential violations of the Foreign Corrupt Practices Act, which only underscores our concerns that the questionable nature of JBS S.A.’s financial practices poses significant risks for its American subsidiaries and the U.S. food system,” the letter noted.

In an email to Feedstuffs, a spokesman for JBS said the company is aware of the letter sent to Mnuchin. “The company has fully cooperated with all relevant authorities in a transparent manner regarding past events in Brazil. The company will continue to cooperate and respond to any subsequent inquiries,” the spokesman noted.

“JBS USA is an important American employer, providing more than 60,000 jobs and partnering with more than 11,000 U.S. farmers, ranchers and poultry producers," he added. "The company plays a critical role in U.S. agricultural communities, creating opportunities for rural family farmers and ranchers who depend on our business to transform their livestock and poultry into products that consumers trust and enjoy.”

The Organization for Competitive Markets (OCM) applauded the inquiry request, saying in a news release that it has been calling out JBS for more than a year for using “ill-gotten influence to take over the beef market in the U.S.” and has continually criticized JBS for accepting aid under the trade mitigation package offered to farmers and through the purchasing of U.S. pork.

Angela Huffman, OCM communications and research director, stated, "The corrupt actions of JBS demonstrate the epitome of unchecked monopoly power. JBS should be stripped of all its U.S. assets. No one should profit from illegal activity. We thank Sens. Rubio and Menendez for their courageous action in taking on the largest meatpacker in the world."

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