Federal Judge Ricardo Leite blocked JBS’s US$300 million sale of the unit to rival Minerva SA, citing a corruption scandal ensnaring JBS’s controlling Batista family, court documents seen by Reuters showed on Wednesday.

In a separate decision, the attorney general’s office urged state auditors to freeze assets of JBS and the Batistas, who own 42 per cent of JBS. The move guarantees that funds reimbursing state lender BNDES for faulty dealings with JBS will be preserved, the attorney general’s office said in a statement.

Common shares in JBS surged 4.3 per cent, while those of Minerva reversed early gains on the judge’s decision. Minerva’s stock shed 2.7 per cent to 11.52 reais as of 4:20 p.m. local time.

Leite, the judge, sits on the court that will review a leniency deal the Batistas reached with prosecutors, and his decision highlights the legal risks for the meatpacker and its founding family.

Last month, Prosecutor-General Rodigo Janot reached a plea agreement with billionaire brothers Wesley and Joesley Batista to avoid prosecution if they turned in 1,893 politicians involved in a bribery scheme.

A separate leniency deal between the Batistas and federal prosecutors was signed on May 31, requiring the family to pay a 10.3 billion reais (C$4.1 billion) fine over 25 years.

The terms of the plea agreement have drawn intense scrutiny after the Batistas alleged that President Michel Temer took part in a bribery scheme, threatening to topple the president and sink his reform agenda.

Leite said in his ruling that the deal to sell JBS beef plants in Argentina, Paraguay and Uruguay could harm the corruption investigation.

In a separate statement Wednesday on the suspension of the beef plants’ sale to Minerva, JBS said it “will take the necessary legal measures in order to appeal the decision.”

— Reporting for Reuters by Lisandra Paraguassu and Cesar Raizer; writing by Marcelo Teixeira and Brad Haynes. Includes files from AGCanada.com Network staff.

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Police carried out five arrests, more than two dozen interrogations and over 100 search warrants, seizing jewels, luxury vehicles, artwork and an airplane in an asset freeze to cover up to eight billion reais (C$3.17 billion) in alleged damages.

The federal judge overseeing the case, Vallisney De Souza Oliveira, ordered the chief executive of meat packer JBS SA and 39 others under investigation to suspend their corporate roles, avoid all capital market activity and forfeit their passports in order to avoid jail.

JBS shares fell 10 per cent, the biggest drop in six months, at the prospect of billionaire brothers Wesley and Joesley Batista, who run JBS and their family’s holding company J+F Investimentos, respectively, blocked from serving at the group’s firms.

The probe of the pension funds is the latest in a string of investigations into corruption at the vast overlap of Brazilian business and politics, rattling Latin America’s largest economy and feeding political instability.

The four pension funds under investigation, which controlled about 280 billion reais in assets last year, have been an important source of investment in Brazil’s credit-starved economy, but political connections at the state-run firms have raised questions about influence in their decisions.

The pension funds caught up in Monday’s investigation are those of state-run banks Caixa Economica Federal and Banco do Brasil, postal service Correios and oil giant Petroleo Brasileiro SA, the company known as Petrobras which has been ground zero of the graft investigations roiling the nation.

Yet police said their investigation focused on losses to pensioners from reckless or fraudulent investments throughout the Brazilian economy.

Other executives affected by the judge’s order include the chief executive of wood pulp maker Eldorado Brasil Celulose SA, also controlled by the Batista family, Jose Carlos Grubisich; and Denise Pavarina, the head of the asset management unit at lender Banco Bradesco SA.

Press representatives for J+F and Eldorado said their executives were collaborating with the investigation.

JBS, in a statement Tuesday, said its legal advisors “are acting to get complete access to the proceeding and the (judge’s) decision as well as its repercussion to the company.”

Bradesco said its asset management units “follow the regulations in funds under management and rules by regulators” and that the bank is co-operating with authorities.

Pension funds Previ, Petros and Funcef said they were collaborating with police. Petros added that the investigation involved decisions made in 2011. Postalis did not immediately respond to a request for comment

Caixa, Bradesco, Banco Santander Brasil and fund manager Rio Bravo Investimentos Ltda confirmed that their asset management units were also targeted by the operation.

In a statement, Caixa said the bank already had an internal investigation about “possible irregularities” involving the employees pension fund’s investments.

Santander Brasil said the federal police asked for documents related to investments by the pension funds in the rig lessor Sete Brasil, which is under bankruptcy protection, and in a fund called Global Equity.

Asset manager Rio Bravo, the target of acquisition by China’s Fosun International, said the fund has always managed pension funds investments “with ethics, honesty and compliance with the laws.”

— Reporting for Reuters by Cesar Raizer; additional reporting by Leonardo Goy in Brasilia, Pedro Fonseca and Stephen Eisenhammer in Rio de Janeiro, and Alberto Alerigi Jr., Tatiana Bautzer, Aluisio Alves and Paula Laier in Sao Paulo; writing and additional reporting by Brad Haynes. Includes files from AGCanada.com Network staff.

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