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UPDATE 4-Brazil police arrest JBS CEO Batista, plea deal in limbo

(Adds corruption-related developments, cattle purchase

By Guillermo Parra-Bernal and Gabriela Mello

SAO PAULO, Sept 13 (Reuters) - Brazil's federal police on
Wednesday arrested the chief executive of JBS SA, the world's
No. 1 meatpacker, accusing him of insider trading ahead of a
plea bargain he signed this year whose disclosure pummeled the
company's stock.

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.

The Batista brothers' lawyer, Pierpaolo Bottini, called the
insider trading allegations and the arrest of the meatpaker's
CEO "unjust, absurd and regrettable." If convicted, the Batistas
may be the first people in Brazil jailed for insider trading.

JBS shares rose 2.4 percent, erasing early
losses, on optimism that Wesley Batista's arrest will accelerate
his ouster 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 arrest was the marquee development on a day dubbed
"Super Wednesday" by local media because of developments in the
dizzying array of graft scandals that have implicated top

The Supreme Court ruled that Prosecutor General Rodrigo
Janot should continue to handle a corruption case against
President Michel Temer, while ex-President Luiz Inacio Lula da
Silva was questioned by federal judge Sergio Moro, Brazil's
leading anti-corruption crusader.

Topping things off, another household name in Brazilian
politics, former Rio de Janeiro state governor Anthony
Garotinho, was arrested in a separate corruption probe in the
midst of hosting a radio show.

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.

Certain units of JBS on Wednesday suspended cattle purchases
temporarily following Batista's arrest, a source familiar with
the matter said, adding that it was unclear how long the
suspension would stay in place.

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 Temer of working to
obstruct a corruption probe, which Temer has repeatedly denied.
The family's investment holding company, J&F Investimentos SA,
paid a record fine of 10.3 billion reais ($3.3 billion) as part
of the plea bargain deal.

Since that agreement 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 seeking to oust the Batistas from the
company's management and board.

In a statement, BNDES said the company should pick a new
chief executive officer in the next shareholders meeting. A
person familiar with the matter said JBS's board did not discuss
succession plans for Batista at a Tuesday meeting.

($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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