May 26, 2017 / 10:53 PM / a year ago

UPDATE 2-Brazil's JBS says Joesley Batista resigns as chairman

(Adds industry group letter to BNDES on Friday, changes headline)

By Tatiana Bautzer

SAO PAULO, May 26 (Reuters) - JBS SA, the world’s largest meatpacker, said on Friday that the brothers Joesley and Wesley Batista, who own the company and are ensnared in a corruption scandal that threatens to topple Brazil’s President Michel Temer, have resigned from senior posts.

Joesley Batista, who unleashed a political crisis in Brazil last week with a plea bargain deal that accused Temer of endorsing the bribing of a witness, resigned as chairman and will leave the board, effective immediately.

He will be replaced by Tarek Farahat, a former Procter & Gamble Co executive who is also a member of the JBS board.

In Friday’s board meeting, the first since the crisis broke, JBS Chief Executive Officer Wesley Batista also resigned from the vice chairmanship of the board.

He was replaced by his father, José Batista Sobrinho as vice chairman, but will remain as chief executive and maintain a seat on the board.

Reuters reported on Thursday that the Batista brothers were coming under intense pressure from minority shareholders and Brazil’s development bank, BNDES, to step back from the company, according to sources familiar with the situation.

One of the sources said shareholders demanded that JBS should not foot the bill for any fine as minority shareholders were not responsible for any corruption-related crimes.

The Batistas have already agreed to a plea bargain with prosecutors. However, the family holding company J&F Investimentos SA, the controlling shareholder of JBS, remains locked in negotiations over a potential leniency deal for the company itself.

J&F’s proposal to pay a $1.2 billion fine was rejected by the prosecutors’ office on Wednesday.

On Friday, the powerful Brazilian Rural Society group said it had sent a letter to development bank BNDES demanding the ouster of the Batista brothers from the board of JBS.

In the letter, Rural Society head Frederico d’Avila, the society argued that BNDES Participações SA, equity arm of the bank and JBS’s second largest shareholder, should increase pressure to force Joesley and Wesley Batista, respectively chairman and chief executive, to step down.

The brothers’ testimony, released last week, unleashed a political crisis in Latin America’s largest economy which is still worsening. It included allegations that they bribed hundreds of politicians.

The head of BNDES, which is also a key shareholder in JBS, Maria Silvia Bastos, resigned on Friday, citing personal reasons.

JBS added Farahat will create and chair a new corporate governance committee. (Reporting by Tatiana Bautzer; Editing by Jonathan Oatis and Diane Craft)

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