Wednesday, December 5, 2007

Chiquita, Terrorism, and Blood Bananas

My familiarity with Corporate Counsel doesn’t extend beyond the title, but their latest issue features an informative and comprehensive account of Chiquita’s financial ties to Colombian terrorism. In March, Chiquita pleaded guilty in federal court to paying $1.7 million to Autodefensas Unidas de Columbia (AUC), a right-wing paramilitary group specializing in kidnapping, rape, torture, and murder. As Human Rights Watch has documented, AUC’s terrorism against civilians included a January 17, 2001 attack in the village of Chengue, where they bludgeoned twenty-four men to death with stones and sledgehammers. This obviously begs the question of how and why Chiquita became involved with AUC in the first place. Corporate Counsel’s Sue Reisinger explains:

“According to court records, Chiquita's Colombian subsidiary, Banadex S.A., first began funding the group in 1997 after receiving veiled threats directed at its property and employees. (Before that, Banadex paid the left-wing terrorists who had controlled the region.) Chiquita sent money to the AUC roughly each month ‘to protect the employees and property of Banadex,’ court records say. Payments were always disguised as either a check to a third party who passed the money to the AUC, or as income to a Banadex employee who paid the AUC in cash.

“[Former Chiquita general counsel Robert] Olson was aware of the AUC's true nature…Whether to pay them was strictly an ethical question, because at that time it was not yet a crime in the United States or Colombia to give money to terrorist groups. Olson and the in-house attorney reported the study's results to the audit committee of Chiquita's board of directors. The lawyers' report concluded that making the payments was extortion and ‘not a voluntary decision,’ the records say. However, the directors decided to continue the payments” (emphasis mine).

This last sentence offers the crux of the matter. Chiquita had already established an unethical pattern of paying off terrorists before AUC threatened its Columbian holdings, thus apparently making it easier to justify paying AUC, even though Olson determined that such an action would be extortion. Yet Resinger notes that Olson and Chiquita executives chose to continue payments after the AUC made it onto the federal “foreign terrorist organization” list (making the payments illegal); after the company learned that what they were doing was illegal; and even after outside counsel urged them to stop. When repeatedly faced with the opportunity to end their financial relationship with AUC, they only stopped after being served federal warrants in March 2004.

As part of a plea agreement, Chiquita has agreed to pay a $25 million dollar fine. This is certainly a significant amount, but we should also consider that from September 10, 2001 (when the US officially recognized AUC as a terrorist group) until payments ceased in 2004, they made nearly $50 million from their Columbian holdings. In short, part of Chiquita’s business was blood bananas, and business was ultimately good. Consequently, while the company found itself in a difficult position, I have a hard time accepting current general counsel James Thompson’s argument that it ultimately made the “morally right” decision. As Reisinger writes near the end of her article:

“Professor Deborah Rhode, head of Stanford Law School's Keck Center on Legal Ethics and the Legal Profession and founding director of Stanford's Center on Ethics, doesn't condone what Chiquita did-but she acknowledges that Olson was faced with a difficult decision. ‘This is a really hard place for a general counsel who wants to do the right thing,’ Rhode says. Yet Rhode believes Chiquita's actions, however well-intentioned, were wrong because the AUC used the money to buy weapons that killed innocent people.”

When Chiquita generates profit from transactions that lead to murder, morality has flown out the window.

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