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UPDATE 3-Brazil police detain JBS CEO Batista; plea deal in limbo

(Adds comment by police investigator; adds comment on reason
for share rise; adds BNDES calling for picking new CEO; adds
detail on other detention orders)

By Guillermo Parra-Bernal and Gabriela Mello

SAO PAULO, Sept 13 (Reuters) - Brazil's federal police on
Wednesday detained the chief executive of JBS SA, the world's
No. 1 meatpacker, saying he used insider information to avoid
hefty losses related to a plea bargain he signed earlier this

Wesley Batista, who has been at the helm of JBS since 2011,
was detained under an arrest warrant against him and his younger
brother Joesley for suspected insider trading. The billionaires,
both in their mid-40s, control 42 percent of JBS.

Their lawyer, Pierpaolo Bottini, called the allegations and
the arrest "unjust, absurd and regrettable." If convicted, the
Batistas may be the first people in Brazil jailed for insider

JBS shares rose 1.7 percent, reversing early
losses, on optimism that Wesley Batista's arrest will accelerate
a search by the company to replace him as chief executive. The
accusations could hurt a plea deal that both brothers signed in
May in relation to a three-year graft probe that has shocked
Brazil's political and business establishment.

The insider trading case involving JBS follows probes by
markets watchdog CVM on trades that took place before the plea
deal was leaked to the press on May 17. The impact from the
leak, which ensnared senior politicians, led to Brazil's worst
financial market selloff in at least a decade.

According to police investigators, the Batistas were aware
of the market impact that their plea deal would have on JBS
shares and the currency. Police said the brothers created a
strategy to protect their JBS holding and help the company amass
large foreign-currency positions ahead of the leak.

On May 18, the stock shed 9.7 percent, while the Brazilian
real tumbled 8.2 percent - its biggest daily decline since
January 1999.

"A day ahead of the leaks, JBS rose to the No. 2 spot in
currency purchases, an unheard of fact," police investigator
Rodrigo de Campos Costa said in a news conference.


The detention of Wesley Batista comes as his plea deal with
prosecutors is unraveling due to alleged omissions in the
brothers' testimony. Some minority shareholders were already
seeking to remove him.

"It is not every day that a CEO getting arrested for insider
trading can be viewed as a credit positive, but we see the
latest events as weakening Batista's push to remain as CEO,"
analysts at CreditSights Inc wrote in a note to clients.

The yield on the company's 7.75 percent bond due in October
2020 rose about 0.17 percentage point to 7.966
percent on Wednesday.

Joesley Batista has been under arrest since Sunday after
recordings suggested he tried to take advantage of prosecutors
and conceal details during negotiations that led to the plea
deal. He has denied any wrongdoing.

In their testimony, the brothers accused President Michel
Temer of working to obstruct a corruption probe, which the
latter has repeatedly denied. The family's investment holding
company, J&F Investimentos SA, paid a record leniency fine of
10.3 billion reais ($3.3 billion) related to the scandal.

Since the plea bargain deal was signed on May 31, Temer and
the Batistas have traded barbs - taking their rift to corporate
boardrooms. State development bank BNDES, whose investment arm
owns 21 percent of JBS, is leading the group of JBS investors
seeking to oust the Batistas from the company's management and

In a statement, BNDES said the company should pick a new
chief executive officer in the next shareholders meeting.

Bottini, the Batistas' lawyer, earlier in the day, said:
"The Brazilian state is using all means to promote revenge
against those who cooperated with justice."

The police said two detention orders were also issued
against executives at the Batista family-owned FB Participações
SA and JBS, without elaborating.

The scheme helped "manipulate markets in a way that all
shareholders incurred some of the losses that FB Participações
would have otherwise had to absorb alone," a police statement

($1 = 3.13 reais)
(Additional reporting by Pedro Fonseca in Rio de Janeiro and
Tatiana Bautzer in São Paulo; Editing by Daniel Flynn and Leslie

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