Dozens of executives of top firms in Brazil have been ordered by the court to step down in the midst of a large-scale investigation into fraudulent activities with pension funds. Top on the list is Wesley Batista, Chief Executive of JBS, the world’s largest beef exporter. The investigation goes as far back as 2011, when the justice department began looking into operations by state-run companies. Five people have been arrested so far, with seizures of jewels, property, artwork and a private jet, to the tune of 8 billion reais ($2.5 billion) to cover damages. Judge Vallisney De Souza Oliveira ordered 40 chief executives to suspend their duties, cease all interactions with the capital market and relinquish their passports or risk jail time. Investigations into corruption are not new to Brazil, but the scope and timing of this has caused major market upheavals.
Shares in JBS fell 10 percent. The pension funds under investigation are of two state-run banks: Banco do Brasil and Caixa Economica Federal, along with Correios (postal service) and oil conglomerate Petrobras. These four pension funds had assets of 280 billion reais ($88 billion) last year. This is particularly important to Brazil’s economy, as the country is in need of access to credit. Another company controlled by the Batista family – Eldorado Brasil Celulose SA is also under investigation. The chief executive of that firm was not ordered to stepdown, however. Denise Pavarina, head of Banco Bradesco, is also being questioned. When asked by reporters, Petros who stated they were cooperating with investigators, said the decisions being investigated were made in 2011. Caixa declared that it had launched its own internal investigations. All pension funds maintain they have carried out all operations ethically and in full compliance with the law.