Chiquita is facing lawsuits in the US over payments made in the 1990s to Colombian paramilitaries. Now it has produced a report on the issue. EP looks at its findings
What’s the background?
Multinational fruit company Chiquita officially admitted in March 2007 that it had been paying up to $250,000-a-year in extortion money to guerrilla groups in Columbia since 1989. The guerrilla groups had been designated as terrorist organizations by the US, and the company was subsequently forced to pay a fine of $25million after an investigation by the US Justice Department. The company’s executives are also liable to prosecution, and Chiquita is still facing ten federal suits seeking billions of dollars in damages for the families of those killed by the guerrilla groups it helped to fund.
Who is involved?
Chiquita’s Colombian subsidiary, Banadex, made the payments to left-wing guerrilla and right-wing paramilitary groups, including the Revolutionary Armed Forces of Colombia (FARC), between 1989 and 1997, and the United Defences of Colombia (AUC), from 1997 to 2003. Against a background in which government forces were unable to maintain law and order, Chiquita says that it made the payments to protect the lives of its 4400 employees on Colombian banana farms, some of whom had been kidnapped and killed by the groups. Lawsuits have been filed on behalf of several hundred victims of Colombian paramilitary violence. Plaintiffs and critics say that after 1997, the AUC became a tool for land grabs by Chiquita, using violence to force small farmers to sell to Chiquita.
What is the purpose of the report?
The special litigation committee (SLC) report is a legal strategy, often used to defend shareholder complaints. Chiquita’s 269-page document was filed with a motion to ‘dismiss’ all shareholder litigation, and as evidence against some of the federal suits. Gordon Smith, law professor at Brigham Young University in the US, has said that ‘Courts are reluctant to... overturn the findings of an SLC that’s deemed to be independent, fully informed and acting in good faith’. The committee is made up of three ‘independent’ Chiquita board members: a retired accountant, the chief executive of a technology company and a nutritional scientist.
What does it say?
The report claims to have ‘found absolutely no evidence to suggest that either the company’s initial decision to make payments in Colombia, or its continued payments… were influenced by any motivation other than the sincere and abiding belief that these actions were necessary to protect the lives of its employees and the integrity of its infrastructure’.
It further claims that the firm made no decisions in ‘bad faith’ and has already suffered reputationally as a result of its actions. ‘Chiquita’s board and management, faced with an untenable situation, struggled to act in the best interests of the company and to do the right thing,’ according to the report’s conclusion. ‘Pursuing litigation will only prolong the company’s entanglement in matters that have absorbed, distracted and damaged it for close to six years.’
Some plaintiff attorneys say the report might actually help their case, however. Terry Collingsworth, a lawyer dealing with hundreds of filed suits, said the SLC’s findings show that Chiquita ‘began supporting the AUC to clear the FARC out of that region’.
What should Chiquita have done?
Some critics, including Collingsworth, say Chiquita should simply have left Colombia as soon as it became clear extortion money was being used for human rights abuses. The assistant US attorney Jonathan Malis told the judge at the an initial hearing in 2007 that ‘Chiquita could have left Colombia, but it made a business decision to stay. For Chiquita to say it had no choice but to be, quote, “a victim” of extortion for years while it reaped the profits of those Colombian operations... does not stand any legitimate scrutiny’.
Jose Humberto Torres, a Colombian human rights lawyer, says the company did have other options: ‘Chiquita should have asked the Colombian government for protection as it pays a security tax. And the government should have been in a position to guarantee this... But Chiquita preferred, out of convenience, to ask for protection from the paramilitaries.’
Plaintiff lawyers have pointed out Chiquita’s failure to seek help from the US government soon enough, and the US ambassador to Bogota between 1994 and 1997, Miles Frechette, has said the company should have immediately sought help from the US, ‘and then the US government, which gives assistance to Colombia, should have raised hell and said, “Get your backsides in gear. Raise enough troops to protect [our interests].” ’
But it’s difficult to find a consensus on what Chiquita should have done. Several risk management consultants approached by EP were reluctant to comment on the advice they would have given Chiquita in this instance.
What happens next?
Chiquita sold its Colombian banana operations for $40m in June 2004, and so has no remaining business interests in the country. The key question now regards what authority lawyers attribute to the report and what impact it will have on the federal cases. About 40,000 people have died since 1990 in Columbia as a result of the armed conflict, which continues to this day.