Reuters: Brazil police raid offices in probe of Caixa loans — Shares of JBS S.A. were down 2 percent

Bonds News | Fri Jan 13, 2017 | 3:59pm EST

UPDATE 4-Brazil police raid offices in probe of Caixa loans

(Adds comments from JBS, Marfrig)

By Pedro Fonseca and Brad Haynes

Jan 13 Brazilian police raided homes and offices on Friday in a corruption investigation of loans that state bank Caixa Econômica Federal extended to meatpacking, finance, toll road and real estate firms between 2011 and 2013.

Brasilia-based federal Judge Vallisney Oliveira issued an arrest and search warrant on grounds that a former minister to President Michel Temer allegedly colluded with a former lower house speaker to grant loans to several companies in exchange for bribes.

Oliveira wrote that the ex-minister, Geddel Vieira Lima, then vice president at Caixa, and former Speaker Eduardo Cunha allegedly steered loans to companies in a graft scheme including meatpackers JBS SA and Marfrig Global Foods SA .

Lima resigned from the cabinet in November amid allegations he had pressured another minister to approve a real estate project. His lawyers did not reply to a request for comment.

Shares of JBS, Brazil’s biggest meatpacker, fell 2 percent on Friday. Marfrig shares fell over 2 percent before rebounding to trade up 1 percent.

Representatives for JBS and Marfrig said their companies’ offices were not raided and they denied any wrongdoing.

Representatives for Marfrig said the company borrowed from Caixa at market rates without any special privileges.

Caixa said in a statement that the bank is collaborating with authorities. A presidential press representative declined to comment.

Police said a statement that the latest investigation followed from text messages discovered on a cell phone in a December 2015 raid on the home of Cunha, then speaker of Brazil’s lower house.

Cunha is now in prison on separate corruption allegations. His lawyers dismissed the latest allegations as "absolutely unfounded."

The police raid on Friday was the latest case raising questions about investment protocols at Caixa, where politically appointed management has long held sway.

Federal prosecutors have previously said they were investigating Caixa for potentially corrupt investments at the Rio de Janeiro "Marvelous Port" development linked to last year’s Olympics.

That project is an 8 billion reais ($2.49 billion) makeover of the city’s dilapidated waterfront, including five 38-story office buildings to be built by U.S. President-elect Donald Trump’s real estate company.

The pension fund for oil company Petroleo Brasileiro SA’s employees called in December for an investigation of losses on investments managed by Caixa’s asset management unit.

Brazil’s federal audit court also blocked Caixa in August from selling bad loan portfolios due to alleged irregularities.

($1 = 3.22 reais) (Additional reporting and writing by Brad Haynes and Guillermo Parra-Bernal in Sao Paulo; Editing by Bernadette Baum and Leslie Adler)

World News | Wed Sep 7, 2016 | 8:12am EDT

JBS CEO ordered to step aside in Brazil pension fund probe

Wesley Batista, chief executive of JBS, the world’s largest beef producer, gestures as he speaks during Reuters Latin American Investment Summit in Sao Paulo March 25, 2011. REUTERS/Paulo Whitaker

By Cesar Raizer | BRASILIA

Brazilian police launched an investigation of fraud at state-run companies’ pension funds on Monday, as a judge ordered dozens of senior financiers and executives away from their firms, including the chief executive of the world’s biggest beef exporter.

Police carried out five arrests, more than two dozen interrogations and over 100 search warrants, seizing jewels, luxury vehicles, artwork and an airplane in an asset freeze to cover up to 8 billion reais ($2.5 billion) in alleged damages.

The federal judge overseeing the case, Vallisney De Souza Oliveira, ordered the chief executive of meat packer JBS SA and 39 others under investigation to suspend their corporate roles, avoid all capital market activity and forfeit their passports in order to avoid jail.


inRead invented by Teads

JBS shares fell 10 percent, the biggest drop in six months, at the prospect of billionaire brothers Wesley and Joesley Batista, who run JBS and their family’s holding company J&F Investimentos, respectively, from serving at the group’s firms.

The probe of the pension funds is the latest in a string of investigations into corruption at the vast overlap of Brazilian business and politics, rattling Latin America’s largest economy and feeding political instability.

The four pension funds under investigation, which controlled about 280 billion reais in assets last year, have been an important source of investment in Brazil’s credit-starved economy, but political connections at the state-run firms have raised questions about influence in their decisions.

The pension funds caught up in Monday’s investigation are those of state-run banks Caixa Economica Federal [CEF.UL] and Banco do Brasil, postal service Correios and oil giant Petroleo Brasileiro SA, the company known as Petrobras which has been ground zero of the graft investigations roiling the nation.

Yet police said their investigation focused on losses to pensioners from reckless or fraudulent investments throughout the Brazilian economy.

Other executives mentioned in the judge’s search and seizure order included the chief executive of wood pulp maker Eldorado Brasil Celulose SA, also controlled by the Batista family, Jose Carlos Grubisich; and Denise Pavarina, the head of the asset management unit at lender Banco Bradesco SA. Neither executive was ordered to step away from their companies.

Press representatives for J&F and Eldorado said their executives were collaborating with the investigation. JBS referred comment to J&F.

Bradesco said its asset management units "follow the regulations in funds under management and rules by regulators" and that the bank is cooperating with authorities.

Pension funds Previ, Petros and Funcef said they were collaborating with police. Petros added that the investigation involved decisions made in 2011. Postalis did not immediately respond to a request for comment

Caixa, Bradesco, Banco Santander Brasil and fund manager Rio Bravo Investimentos Ltda confirmed that their asset management units were also targeted by the operation.

In a statement, Caixa said the bank already had an internal investigation about "possible irregularities" involving the employees pension fund’s investments.

Santander Brasil said the federal police asked for documents related to investments by the pension funds in the rig lessor Sete Brasil, which is under bankruptcy protection, and in a fund called Global Equity.

Asset manager Rio Bravo, the target of acquisition by China’s Fosun International Ltd, said the fund has always managed pension funds investments "with ethics, honesty and compliance with the laws."

(Reporting by Cesar Raizer; Additional reporting by Leonardo Goy in Brasilia, Pedro Fonseca and Stephen Eisenhammer in Rio de Janeiro, Alberto Alerigi Jr., Tatiana Bautzer, Aluisio Alves and Paula Laier in Sao Paulo; Writing and additional reporting by Brad Haynes; Editing by Sandra Maler and Leslie Adler)