Exclusive: Brazil eyes clearer leniency deals after J&F uproar, sources say

SAO PAULO A backlash in Brazil over plea and leniency deals with the billionaire family that controls meatpacker JBS SA has led prosecutors to start discussions on creating clearer rules for future agreements to ensure equal treatment, three people familiar with the matter said.

The talks over a “basic set of patterns and parameters” to negotiate fines are at a very early stage, two of the people said. Federal prosecutors who serve on a body that validates leniency deals are leading the talks, the people added.

A framework could speed up approval of the accords which allow companies to avoid a ban on doing business with Brazil’s government and usually follow a plea deal admitting guilt. A key condition is the rules should not curb prosecutor’s independence to negotiate the best possible deal, the people added.

With more potential plea bargains under negotiation in Brazil’s biggest corruption probe, “Operation Car Wash,” the public has grown concerned that a lack of clear rules could jeopardize equal justice for all.

The billionaire Batista family’s 10.3 billion-real ($3.1 billion) leniency deal sparked anger in Brazil over what many saw as lax penalties and a lack of transparency. Many Brazilians questioned Prosecutor-General Rodrigo Janot’s plea deal by which he decided not to jail brothers Joesley and Wesley Batista – who admitted to bribing nearly 2,000 politicians.

“The implementation of a pre-defined framework to enter leniency negotiations would help enhance transparency,” said one of the people. “It could also help validate prior accords, which could be used as a benchmark.”

A unit of the public prosecutor’s office is expected to discuss the Batista leniency deals within the next two weeks, before the deal is analyzed at a district court in the capital Brasilia, one of the people said.

Janot’s office declined to comment, as did Brazil’s federal public prosecutor, which approves the fines. A public relations firm representing the Batistas and their holding company J&F Investimentos SA declined to comment.

Though prosecutors said their fine for the Batistas and J&F were a world record, lawyers questioned why that accord’s terms differed so much from other leniency deals.

Prosecutors gave the family 25 years to pay the fine and pegged it to Brazil’s consumer price index, sharply reducing the penalty’s net present value. According to Thomson Reuters calculations, the fine’s net present value is 5.45 billion reais – about 47 percent less than in nominal terms.

By contrast, a 3.9 billion-real fine that engineering group Odebrecht SA agreed to pay over 22 years will be adjusted by the benchmark overnight Selic interest rate, currently running well above annual inflation.

A state attorney is investigating whether the Batista-J&F leniency fine harmed taxpayers’ interests. Other prosecutors investigating the family’s dealings with state banks have complained that the leniency fine is too low, one of the people said.

“The reputation and credibility of future leniency deals greatly hinge on implementing clear rules guiding prosecutors through a fair negotiation,” said Modesto Carvalhosa, a São Paulo-based lawyer who specializes in corruption issues.

PRESIDENT TEMER

The Batista brothers built JBS from a small slaughterhouse in Brazil’s midwestern plains into the world’s No. 1 meatpacker in over a decade, helped by political connections allowing them to access cheap state loans for acquisitions.

Between 2008 and 2015, JBS participated in about 74 mergers and acquisitions totaling $30 billion, Thomson Reuters deals intelligence data showed. Simultaneously, J&F diversified into fashion brands and footwear, dairy production, pulp processing and banking.

Janot has defended his plea deal with J&F and lauded the strength of the evidence the Batistas brought – including documents, tapes and photographs.

One of the people, who worked on prior leniency deals, said financial penalties are based on qualitative criteria such as the volume, depth and timeliness of evidence. The brothers’ decision to provide evidence ahead of any attempt to prosecute them counted, the people said.

The Odebrecht deal was markedly different. Family scion Marcelo Odebrecht had been jailed for a year when he agreed to cooperate – after a police operation uncovered an entire department dedicated to bribery within his firm.

In his testimony, Joesley Batista accused President Michel Temer of working to obstruct a corruption probe, and handed over recordings backing that allegation. Temer has repeatedly denied any wrongdoing.

“Bringing evidence against a sitting president is a big thing, a powerful incentive to cut a beneficial deal,” one of the people said.

However, the lack of pre-defined rules to calculate a fine might have given the brothers an “unwanted upper hand during leniency talks,” the person said.

J&F and the Batistas are involved in five different investigations. The accusations against Temer have put at jeopardy the passage of much-needed legislation to revamp Brazil’s outdated pension, labor and tax codes.

($1 = 3.2970 reais)

(Reporting by Guillermo Parra-Bernal- Additional reporting by Ricardo Brito in Brasilia and Bruno Federowksi and Brad Brooks in São Paulo- Editing by Andrew Hay and Phil Berlowitz)