Brazilian Distributor Caught Up in the Meat of the Foreign Corrupt Practices Act

By: Brandon Kroll*| Guest Writer

Philip Halling [CC BY-SA 2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Wikimedia Commons

Philip Halling [CC BY-SA 2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Wikimedia Commons

If you have ever eaten at McDonald’s, Burger King, or Outback Steakhouse, then you have probably eaten the meat of JBS, the world’s largest meat producer. JBS is a global company that was started in Brazil in 1953. Since then, the beef and chicken giant has been aggressively expanding its reaches all over the globe. However, JBS finds itself under fire for bribing politicians in Brazil, most notably Brazilian President Michel Temer. This made news after Joesley Batista, the former chairman of JBS, told prosecutors that the company had paid politicians bribes in exchange for “taxpayer-subsidized loans and other favors.”  Batista subsequently stepped down from his position in the company.

Although this is a company that is headquartered in Brazil, JBS may be subject to punishment by the U.S. for violating the Foreign Corrupt Practices Act of 1977 (“FCPA”). This act prohibits certain classes of persons or entities from making payments to foreign government officials for the purposes of “assisting in obtaining or retaining business.” This Act also contains anti-bribery provisions to tighten the restrictions placed upon the persons and entities covered by the FCPA. While the scope of the FCPA traditionally applies to issuers (companies listed on any U.S. national securities exchange) and domestic concerns (any business incorporated in the U.S. or any foreign company with its principal place of business in the U.S.), it can also apply to foreign companies offering American Depository Receipts (“ADRs”) in the U.S.

At first impression, this may seem completely irrelevant to the U.S., since it is the interaction of a foreign private company with a foreign government. However, the U.S. has an interest in preventing actions like these to protect domestic employees and shareholders. Therefore, it is important that foreign companies be subject to laws like the FCPA in order to deter these companies from committing these acts of bribery. While JBS does have a subsidiary, JBS USA, in the U.S., that fact is not enough to hold JBS accountable under the FCPA. Parent companies may be liable under the FCPA for the wrongdoings of their subsidiaries, but in this case it is the wrongdoing of the parent company at issue.  As for the other two categories that the FCPA covers, JBS does not directly sell securities on any U.S. market, and because its principal place of business is not in the U.S., JBS is not a domestic concern. There is also no evidence that suggests that JBS used any instrumentality of interstate commerce in the U.S. to commit these acts.

While JBS looks like it may be outside of the scope of the FCPA in this case, there is one avenue that may connect JBS to the FCPA. As mentioned above, foreign issuers that offer ADRs in the U.S. may be subject to the FCPA.  JBS does, in fact, offer ADRs here in the U.S.  Therefore, it is very likely that JBS may be held accountable for its actions under the FCPA.  JBS is currently being sued in the Eastern District of Pennsylvania, therefore this issue may be resolved in the near future.

Brandon Kroll is a second-year law student at Wake Forest University School of Law. He graduated from West Virginia Wesleyan College with a Bachelor of Arts degree in Philosophy with a minor in Business. Upon graduation from Wake Forest, he plans to return to West Virginia to practice law.