- Company Name
- BRF S.A.
- Stock Symbol
- Class Period
- April 4, 2013 to March 2, 2018
- Motion Deadline
- May 11, 2018
- Southern District of New York
The complaint charges BRF and certain of its current and former officers with violations of the Securities Exchange Act of 1934. BRF, headquartered in Brazil, is a food processor and the world’s largest poultry exporter. The Company’s portfolio includes established brands in Brazil and abroad, such as Sadia, Perdigão, Qualy, Chester, Perdix and Paty.
The complaint alleges that throughout the Class Period, defendants made materially false and misleading statements and or failed to disclose adverse information regarding the Company’s business and operations, including that BRF employees had bribed regulators and politicians to subvert inspections in order to conceal unsanitary practices at the Company’s meatpacking plants, and that the foregoing conduct, when it came to light, would foreseeably subject the Company and its officers to heightened regulatory enforcement and/or prosecution. As a result of these false statements and/or omissions, the price of BRF American Depositary Receipts (“ADRs”) was artificially inflated during the Class Period to above $25 per share.
On March 17, 2017, news outlets reported that Brazilian federal police had raided the offices of BRF and dozens of other meatpackers following a two-year investigation into alleged bribery of regulators to subvert inspections of their plants. The probe, known as “Operation Weak Flesh,” had uncovered some 40 cases of meatpackers who had bribed inspectors and politicians to overlook unsanitary practices, such as processing rotten meat and running plants with traces of salmonella. According to media reports, police found evidence that the companies were tampering with packages to sell products that had already expired and that higher-than-permitted levels of parts such as “pig heads” were mixed with sausages and cold cuts. Police arrested three BRF employees, as well as 20 public officials. On this news, the price of BRF ADRs fell $0.99 per share, or nearly 8%, to close at $11.81 per share on March 17, 2017.
On February 23, 2018, the Company held a conference call with investors and analysts to discuss its fourth quarter 2017 earnings results. In the call, Chairman of the Board Abilio Diniz and CFO Lorival Luz discussed the impact of “Operation Weak Flesh.” On this news, the price of BRF ADRs fell 8% to close at $8.73 per share on February 23, 2018.
Then on March 5, 2018, Reuters reported that Brazilian federal police arrested BRF’s former Chief Executive Officer, Pedro de Andrade Faria (“Faria”), on charges that he and other executives, including the Company’s Vice President of Global Operations, Hélio Rubens Mendes dos Santos Júnior, were aware that BRF committed fraud by trying to avoid food safety checks. According to the report, the “police cited evidence that five laboratories accredited by the Agriculture Ministry colluded with the analysis department of BRF to ‘falsify’ test results related to the safety of its industrial process.” In a court ruling authorizing the arrests, Brazilian federal judge André Duszczak said “Faria and other BRF officers sought to cover up claims of possible food contamination, as shown in certain laboratory tests, made by a former employee in a labor lawsuit.” On this news, the price of BRF ADRs price fell $1.83 per share, or more than 19%, to close at $7.59 per share on March 5, 2018.