NEW YORK (Reuters) - Brazil’s BRF SA has been sued in the United States by a shareholder who accused the world’s largest poultry exporter of concealing its involvement in food safety fraud, culminating in the arrest of a former chief executive officer.
A complaint was filed on Monday night in the U.S. District Court in Manhattan on behalf of holders of BRF’s American Depositary Receipts from April 4, 2013 to March 2, 2018, and seeks to let them sue as a group in a class action.
The plaintiff, Ryo Nakamura, claimed that BRF, former CEO Pedro Faria and other officials artificially inflated the Sao Paulo-based company’s share price by misleading shareholders about its operations and compliance practices.
Nakamura said this included the payment of bribes to regulators and politicians to conceal unsanitary practices at BRF’s meatpacking plants, and that BRF’s share price fell as news of the probe known as “Operation Weak Flesh” came to light.
BRF’s ADRs closed at $7.59 on March 5, down 19 percent in one day and 51 percent from early October, after Faria was arrested and a Brazilian judge accused BRF officials of covering up possible food contamination.
The lawsuit seeks unspecified damages.
BRF had no immediate comment on Tuesday on behalf of the defendants.
It is common in the United States for shareholders to file securities fraud lawsuits after the revelation of alleged wrongful conduct caused a company’s stock price to decline.
Non-U.S. companies such as BRF have enjoyed a partial shield from such lawsuits since the U.S. Supreme Court in 2010 made it harder to sue over securities sold or listed outside the United States.
The case is Nakamura v BRF SA et al, U.S. District Court, Southern District of New York, No. 18-02213.
Reporting by Jonathan Stempel in New York and Ana Mano in Sao Paulo; Editing by Susan Thomas