Chiquita Banana Corporation Forced to Pay Us$25 Million Fine for Supporting Paramilitary Group

Article excerpt

The banana company Chiquita Brands International admitted to a US federal court in March that it had made almost US$2 million in payments to Colombia's top paramilitary group Autodefensas Unidas de Colombia (AUC), incurring US$25 million in fines for supporting the organization, designated a terrorist group by the US State Department, and others like it. Colombian prosecutors have since sought extradition of Chiquita executives for supporting the death squads responsible for a majority of atrocities in the country's ongoing civil war. Another US-based company, Drummond, is facing a criminal investigation into whether it played a role in the murder of three union leaders in Colombia.

Chiquita paid US$1.7 million in protection money over 7 years

Chiquita pled guilty in front of US District Judge Royce C. Lamberth in Washington, DC, on March 19 to charges that, for years, it paid the AUC to protect its Colombian banana-growing operations. The company pleaded guilty to one count of doing business with a terrorist organization.

The plea was part of a deal with prosecutors that called for the US$25 million fine. The fine is to be levied at a sentencing hearing on June 1, and Chiquita pledges to cooperate in a Justice Department investigation of the payments. No Chiquita executives were charged.

The agreement ends a lengthy Justice Department investigation into the company's financial dealings with right-wing paramilitaries and leftist rebels the US government deems terrorist groups. Prosecutors say the Cincinnati-based company and several unnamed high-ranking corporate officers agreed to pay about US$1.7 million in at least 100 installments between 1997 and 2004 to the AUC.

The AUC has been responsible for some of the worst massacres in Colombia's civil conflict and for a sizable percentage of the country's cocaine exports. The US government designated the right-wing militia a terrorist organization in September 2001.

Prosecutors said the company made the payments in exchange for protection for its workers. In addition to paying the AUC, prosecutors said, Chiquita made payments to the leftist Ejercito de Liberacion Nacional (ELN) and the Fuerzas Armadas Revolucionarias de Colombia (FARC), as control of the company's banana-growing area shifted.

Chiquita stock rose sharply since the deal was announced the week before. It had fallen 16% in 2007, leaving the company with a market value of US$565.7 million.

Chiquita: payoffs were "for the safety of our employees"

"The payments made by the company at all times were motivated by the company's good faith and desire and concern for the safety of all of its employees. Nevertheless, we recognize the obligation to disclose the facts and circumstances of this admittedly difficult situation to the United States government and the Department of Justice," James Thompson, senior vice president and general counsel, told reporters after entering the company's plea.

Activities of the AUC included drug trafficking, assassinations, kidnappings, and the murder of civilians in Colombia, where Cincinnati-based Chiquita had banana-producing operations, the US government said.

The company sold its Colombia banana business to Invesmar Ltd. for US$51.5 million in 2004. Chiquita recorded a reserve of $25 million in 2006 in anticipation of the fine. The company said in May 2004 that the US was investigating the role of a Colombian subsidiary in making payments to groups identified as foreign terrorists.

"Funding a terrorist organization can never be treated as a cost of doing business," US Attorney Jeffrey Taylor said in a statement. "American businesses must take note that payments to terrorists are of a whole different category. They are crimes."

Colombia's illegal armed groups include both left-wing insurgents, who extort money from companies and individuals to finance a four-decade fight against the government, and right-wing paramilitaries, which began in the early 1980s as private armies for landowners. …