The slippery slope of paying extortionists tripped up Chiquita in the late 1990s and early 2000s, much like Donald below...
But two years after the company agreed to pay a $25 million fine for paying violent paramilitaries in Colombia to protect its employees there, Chiquita is still dealing with the fallout. If you were the CEO of Chiquita, what would you have done?
A Boatload of Baddies
Chiquita, famous for its bananas, has made a boatload of money in the Uraba and Santa Marta regions of Columbia. The company employed 3,500 people there, the General Motors to Detroit.
The problem? Columbia is the playground for FARC, a self-proclaimed Marxist-Leninist revolutionary guerilla organization, and the oldest insurgent group in the Americas. Adding to the fun is the AUC, an umbrella group for regional paramilitary groups who fight insurgents, and often just as violent and ruthless as the insurgents they fight to defeat. The trio was complete with the ELN, a group similar to FARÇ.The region was incredibly volatile as the war, financed by foreign powers and the cocaine trade, raged on. FARC, AUC and ELN demanded that Chiquita pay "taxes" for protection - if Chiquita paid, the forces would protect the employees.
Chiquita had three options: pay the taxes and knowingly finance violent groups committing atrocious murders; not pay the taxes and risk the lives of their employees; or pack up and call it a day, abandoning 3,500 workers and their families.
What would you do?
Paying the boatman
Between 1997 and 2004, according to the documents filed in 2007 in U.S. v. Chiquita, the company paid almost $2 million to protect its workers. Prior to 1997, Chiquita had also paid ELN. These payments were made through an intermediary called a "convivir." While this isn't exactly something to be proud of, Chiquita wasn't doing anything illegal - until 2001.
On September 10, 2001, the U.S. designated AUC as a terrorist group (FARC and ELN had been designated terrorist organizations in 1997). For some reason, it was designated again exactly two years later, in 2003.
Thanks to C.F.R. 594.201 and 204, no U.S. person can engage in transactions with groups desginated as terrorist organizations. For example, AUC, FARC and ELN.
The problem is that Chiquita says it somehow missed the announcement that the AUC was a terrorist organization (although the case documents suggest otherwise), and continued to make payments to AUC - over $825,000.
In 2003 an outside counsel advised Chiquita that AUC was a terrorist group and that it had to stop the payments immediately, as they were illegal. Some of the defendants in the case were willing to continue with the status quo, saying "Let them just sue us."Someone in the upper echelon at Chiquita didn't agree, and met with the Justice Department to voluntarily come forward about the payments. Interestingly, the Justice Department acknowledged that the situation was "complicated." That person suggested to the Board that Chiquita sell the company's interests in the region.
The payments continued but not with the full knowledge of certain members of the board. In early 2004, Fernando Aguirre became CEO and chairman of Chiquita. Aguirre stopped the payments and sold the company's holdings in the region.
The Justice Department filed a suit alleging that Chiquita paid known terrorist groups in clear violation of the law. In 2007, Chiquita resolved the case and paid a $25 million fine. The Justice Department decided not to prosecute any of the Chiquita officers.
Thanks for protecting us, but no thanks
The Justice Department's decision to not pursue charges against Chiquita infuriated Columbia's prosecutor general (their attorney general), who wants to extradite the officers involved to stand trial in Columbia. There are five lawsuits pending against Chiquita, seeking money for the families killed by the paramilitary groups. The suits say that since Chiquita paid the groups the extortion money, Chiquita should be held responsible for the paramilitary's actions (murders, kidnappings, all sorts of other pleasant extracurricular activities).
Chiquita says that isn't so. In an interview with 60 Minutes, Aguirre said the groups "were funded with hundreds of millions of dollars. They had the guns. They had the bullets. So I don't know who in their right mind would say, 'Well, if Chiquita would have stopped, these killers would have stopped.' I just don't see that happening." When asked whether he felt that the company has any responsibility to compensate the victims of the paramilitaries in Colombia, Aguirre said the "responsibility of any murders are the responsibility of the people that made the killings, of the people who pulled the trigger."
Another squirt of lemon on the open wound is that other companies are engaged in the same kinds of illegal payments. Rep. William Delahunt, who is leading a Congressional investigation into the issue, thinks "that there are other American companies that have conducted themselves the same way that Chiquita has, except they haven't been caught." Delahunt won't name the companies because he wants them to come forward voluntarily, like Chiquita did.
Two under suspicion are Dole Food Company and Fresh Del Monte Produce, but they deny any wrongdoing. Dole is now under investigation by the Columbian government.
What is a CEO to do?
Pretend you are the CEO of Chiquita, faced with the three options described above: pay, don't pay, or get up and go. What would you do?
Now pretend you are the CEO of Dole. You haven't come forward with admission of guilt, even though the Justice Department has encourged companies to do so. You've watched Chiquita be put through the wringer, taking financial hits and PR hits. Say you have been making payments and you know it. What would you do?
This is a difficult issue for me to resolve. I can't imagine financing violent terrorist groups, whether they are desginated as such or not. But, if I don't pay, I risk the lives of my employees and their families. And finally, if I sell the company's holdings, I abandon the 3,500 workers, and who knows what will happen to them - murder, kidnapping, maybe nothing, maybe everything.
What do you think? Vote below. For more, watch the 60 Minutes video.
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