September 26, 2018 / 2:37 PM / 23 days ago

UPDATE 2-JBS settlement deal rejected by Brazil's regulator

(Adds details on CVM accusation, background)

By Carolina Mandl

SAO PAULO, Sept 26 (Reuters) - The Brazilian securities regulator CVM said on Wednesday it had rejected a settlement with the world’s largest meatpacker JBS SA and major shareholders in an insider trading case because of the severity of the allegations.

Wesley Batista, the former chief executive of JBS, and his brother Joesley are the largest individual shareholders. They have been accused by prosecutors of snapping up dollar future contracts based on their knowledge of a plea bargain deal in a corruption case they had signed last year.

The billionaire brothers were arrested in September last year and jailed. Both of them were released around five months later.

The proposed settlement involved an offer from JBS, the Batistas and related companies to pay a total 184.5 million reais ($45.4 million) in six installments quarterly to end the proceedings, CVM said. Settlements do not necessarily imply an admission of guilt, it added.

According to the regulator’s calculations, the accused may have made a profit that surpassed 600 million reais, it said, adding it “could be the most serious case of improper use of privileged information and price manipulation in the history of Brazil’s securities market.”

JBS and the Batistas declined to comment. Their lawyer has previously described the charges as “unjust and absurd.”

In addition to the currency futures bet, the companies in question also traded stocks based on nonpublic information about the plea bargain deal, CVM said.

The regulator said it had decided to reject the financial settlement after considering the severity of the accusations.

It remains unclear what kind of remedy the regulator is hoping for, although it could push for a conviction or at least an admission of guilt.

The regulator declined to comment when asked about the matter.

In a separate case regarding the late disclosure of plans for an initial public offering of JBS Foods International BV, CVM agreed to a deal with JBS shareholders and former executives.

Shares of JBS were up 2.8 percent in early afternoon trade, at 9.58 reais, outperforming the benchmark Bovespa stock index. ($1 = 4.0426 reais) (Reporting by Carolina Mandl; editing by Steve Orlofsky and Rosalba O’Brien)

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