June 8, 2017 / 2:24 PM / 9 months ago

UPDATE 1-Petrobras revokes gas contract with J&F unit over corruption

(Updates throughout with details from contract, context)

By Luciano Costa and Paula Laier

SAO PAULO, June 8 (Reuters) - State-controlled Brazilian oil company Petróleo Brasileiro SA said on Thursday it was revoking a contract to supply natural gas to a power plant owned by a unit of J&F Investimentos SA due to a breach of anticorruption terms.

J&F is controlled by the billionaire Batista family, key players in a corruption scandal threatening to topple President Michel Temer. The dispute is the latest example of how an explosive plea bargain has hurt their vast corporate empire.

J&F’s Âmbar Energia unit stated in the gas supply contract, signed in April, that it had not paid or offered bribes to officials, Petrobras said in a securities filing, adding that it was seeking damages.

J&F owners Joesley and Wesley Batista admitted last month to paying 600 million reais ($183 million) in bribes to nearly 1,900 politicians in recent years, pouring gasoline on Brazil’s deepest political crisis in decades.

As part of a plea bargain, Joesley Batista gave prosecutors a recording of a conversation with Temer in which he asked for help in an antitrust dispute between Âmbar and Petrobras over the terms of the supply contract for the UTE Mario Covas power plant.

Petrobras will seek claims amounting to 70 million reais from Âmbar due to the alleged breach of contract, according to the securities filing on Thursday.

J&F representatives did not immediately respond to requests for comment.

The lawsuit underscores how J&F’s role in the corruption scandal is hurting its operations ranging from energy and food to banking and consumer goods, fueling investor concerns over its ability to maintain steady funding.

J&F agreed to pay 10.3 billion reais in fines for its participation in the scheme, driving the view that it will sell assets as it seeks to raise funds to cover the fine.

J&F-owned JBS SA, the world’s largest meatpacker, on Tuesday agreed to sell its Argentine operations to a smaller rival but said core U.S. assets, including a majority stake in Pilgrim’s Pride Corp, are not for sale. ($1 = 3.2842 reais) (Reporting by Luciano Costa and Paula Laier; Writing by Bruno Federowski and Ana Mano; Editing by Jeffrey Benkoe and Brad Haynes)

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