In 1991, both the International Finance Corporation (IFC) and the Inter-American Investment Corporation (IIC) became minority shareholders of Granja Moro as part of a financing deal. In the last years of the 1990’s, Granja Moro, for decades the leader company in the poultry sector in Uruguay, faced serious financial difficulties that eventually led to its failure in 2002. It was later discovered that the company was the subject of a fraudulent scheme by several top managers and members of the Board of Directors.

In 2004, bondholders that had purchased bonds issued by Granja Moro in 1997 brought a claim against Granja Moro, the IFC and the IIC. The bondholders argued that they were misled in the prospectus, and that the IFC and the IIC should be held liable for the obligations of Granja Moro, both on the grounds of their participation in the company’s activities and of their duties as shareholders who had a right to appoint a member of the Board of Directors.

In October 2011, a first instance decision dismissed the plaintiff’s claim. The ruling established that there was no evidence of the participation of the IFC and the IIC in the fraud and that the content of the prospectus could not be attributed to a willful act on their part.

The Court of Appeals decision rendered on July 27 confirmed the first instance decision in all its terms. It indicates that the IFC and the ICC were completely foreign to the situation that led to Granja Moro’s bankruptcy and that they were not in a position to prevent a fraud that due to its complexity was not even detected by the auditors of the company.