Terry Collingsworth said the SLC’s findings are consistent with his theory that Chiquita “began supporting the AUC to clear the FARC out of that region.” For more info check this out.
New report peels back layers on how, why Chiquita paid extortions to Colombian terrorists
http://www.msnbc.msn.com/id/30430167/
The first demand was for $10,000.
It was delivered in the late 1980s to the manager of a Colombian banana farm at Chiquita Brands International Inc. It came from the Revolutionary Armed Forces of Colombia (FARC), Marxist rebels who implied Chiquita employees would be kidnapped if the money wasn’t paid.
“Everyone understood this was clearly extortion money,” said Robert Kistinger, then in charge of Latin American operations for Chiquita. “We had an ongoing situation where people were being killed.”
And so begins a tale that ends badly for Chiquita.
In March 2007, the Cincinnati banana company stunned investors, employees and the local business community by admitting it made regular payments to Colombian paramilitary groups for 15 years, ending in 2004. It said it had no choice – the lives of its employees were at risk.
Chiquita pled guilty to a felony charge of engaging in transactions with terrorists. It has paid $10 million toward a $25 million fine and faces 10 federal suits seeking billions in damages. Nine have been consolidated before U.S. District Judge Kenneth Marra in South Florida.
That’s where you’ll find Kistinger’s account of that $10,000 demand.
It’s part of a recently filed 269-page report by a “special litigation committee” of Chiquita’s board of directors. The SLC is a legal strategy, often used to defend shareholder complaints. The report was filed with a motion to dismiss shareholder litigation. In a separate motion, Chiquita asked Marra to toss out six tort actions that argue Chiquita should be held liable to the families of people killed by the guerrilla groups it funded.
“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,” said the report’s concluding paragraph. “Pursuing litigation will only prolong the company’s entanglement in matters that have absorbed, distracted and damaged it for close to six years.”
Legal strategy aside, the SLC report offers an inside look at Chiquita’s turbulent history in Colombia. For the first time, it identifies executives who initiated payments, those who tracked them and those who ultimately halted the practice in 2004. And it sheds light on why the payments continued even after prosecutors warned they were illegal.
“We read it with interest,” said Steven Steingard, whose Philadelphia law firm, Kohn Swift & Graf, represents the widows of five American missionaries kidnapped and murdered by the FARC in 1993 and ’94.
“I’m not aware of a case where an American company has laid out in such detail those kinds of things,” he said. “It’s a remarkable listing of …the conduct that went on for years and years that nobody knew about.”
Deadly bus attack
Chiquita’s special litigation committee is a panel of independent Chiquita directors, all of whom joined after the firm exited Colombia and stopped making payments. Those directors, Howard Barker, William Camp and Clare Hasler, spent nine months investigating how officers and directors managed the payments and disclosed them to federal prosecutors and investors. The SLC had its own law firm, hired its own investigators. They interviewed more than 50 witnesses and reviewed 750,000 pages of documents. They provided extensive context on the political climate in Colombia, where leftist revolutionaries made a practice of menacing and extracting payments from land owners and multinationals. Chiquita was both.
“The SLC believes that the total amount of the guerrilla payments ranged from $100,000 to $200,000 per year,” the report said.
Initially, the money went to left-wing groups, known as FARC and ELN. Violence was pervasive in Colombia. The SLC details many acts against the company, including a 1995 incident in which a bus carrying employees was attacked and 25 people killed.
“Several witnesses believed that the FARC targeted the bus,” the report stated. “The massacre had a major impact on personnel both in Colombia and Cincinnati in reinforcing the reality of the threat of violence.”
Starting in 1997, Chiquita paid a right-wing group known as the AUC, a sworn enemy to the FARC. It was designated a foreign terrorist organization by the State Department, making payments to it a violation of U.S. law. The SLC affirmed what Chiquita has said for years: No company official knew of the designation until 2003. Within two months of its discovery, the company reported its violations to the Justice Department.
More than a dozen knew
The SLC identified more than a dozen employees and board members who knew about the payments prior to the company’s discovery of the terrorist designation. They included former CEOs Keith Lindner, Steven Warshaw and Cyrus Freidheim, and company attorneys Charles Morgan, Robert Olson and Gregory Thomas. As early as 1995, the company had tracking mechanisms to monitor what it then called “sensitive” payments. In 1994, it produced the first in a series of legal opinions that concluded the payments complied with Colombian law.
From 1998 to 2001, the company “disclosed a large quantity of information” about guerrilla payments to investigators from the Securities and Exchange Commission and the Justice Department, the SLC revealed.
“Despite these broad disclosures, no one from the government ever suggested that the payments violated any provision of U.S. law,” the report stated.
The SEC probe led to a $100,000 settlement in which Chiquita admitted an employee paid a $30,000 bribe to a port official in Uraba and that it violated accounting provisions in how it recorded the payment. The settlement was finalized in 2001, weeks after the AUC was listed as a terrorist organization.
Payments to the AUC continued for 28 months after the initial listing. They continued for nearly a year after Chiquita discovered the designation in 2003. The SLC report indicates that’s partly because company officials feared the consequences of halting payments and partly because they misjudged the response they would ultimately receive from prosecutors.
Condoning the payments?
The report devotes 40 pages to its four years of negotiations with the Justice Department. One recurring theme in those pages is a communications gap on the crucial question of whether payments could continue while prosecutors reviewed facts in the case.
Those problems started with an April 24, 2003, meeting in Washington, D.C. It was arranged by Chiquita director Roderick Hills, a former SEC chairman. Participants included Olson, Hills, outside counsel Laurence Urgenson and Michael Chertoff, former secretary of Homeland Security who was then the head of Justice’s criminal division.
“The meeting at DOJ – and the interpretation of its meaning by Hills, Olson and Urgenson – had an enormous influence on the company’s actions in the months that followed and ultimately became a source of fierce controversy between DOJ and the company,” said the report.
Chertoff told Chiquita the payments were illegal. But he agreed to consider “the foreign policy implications” of a withdrawal and acknowledged the issue was “complicated.” Within a month of that nuanced response, Chiquita resumed payments to the AUC, according to the report.
Hills told the SLC that it was “inconceivable that DOJ did not understand that payments would have to continue” and Olson “believed the government was, in effect, condoning the payments” while other government agencies reviewed the matter.
In September 2003, the SLC reports that federal prosecutor Michael Taxay “specifically declined” to tell Chiquita that the payments had to stop. But Taxay’s boss at the time claims that isn’t true.
“They were certainly told,” said Roscoe Howard Jr., now a partner with the Troutman Sanders firm in D.C. “I know they were told because I directed that they be told.”
Taxay couldn’t be reached for comment.
Howard said Chiquita sought meetings with higher-ranking Justice Department officials when it didn’t get the answers it wanted from prosecutors. But he doesn’t think that approach influenced the outcome of the case.
“I’m sure Chiquita wanted to approach this as a policy issue,” he said. “I was treating it like a regular crime.”
‘Necessary to protect lives’
According to the SLC, Chiquita was encouraged by the early response from Justice Department officials. But a December 2003 meeting “went badly … and strained the company’s relationship” with prosecutors.
In the following two months, Chiquita agreed to sell its Colombian subsidiary, hired CEO Fernando Aguirre and made its last payment to the AUC. Prosecutors intensified efforts in early 2004, but the case appeared headed for settlement by the end of that year. In September 2005, a new prosecutor took charge, turning the case in a “more aggressive direction,” according to the report.
Assistant U.S. Attorney Jonathan Malis hauled directors before a grand jury in 2005 and told Chiquita “directors … on the board while the payments were ongoing” could face charges. He pushed for the firm to expand its privilege waiver so prosecutors could examine letters and e-mails between Chiquita and its law firm, Kirkland & Ellis.
Chiquita’s potential fine was later reduced from $79 million to $25 million, but the government wouldn’t budge on the request that executives not be prosecuted.
Chertoff declined to comment. Malis could not be reached for comment.
The impact of the SLC report will depend on what lawyers make of it. Brigham Young University law professor Gordon Smith said it should help Chiquita dispose of the four shareholder cases pending against it.
“Courts are reluctant to … overturn the findings of an SLC that’s deemed to be independent, fully informed and acting in good faith,” Smith said.
But two plaintiff attorneys pursuing lawsuits on behalf of victims of paramilitary violence say the report will help their case. Terry Collingsworth said the SLC’s findings are consistent with his theory that Chiquita “began supporting the AUC to clear the FARC out of that region.” The Washington lawyer’s human rights group has filed suits on behalf of several hundred victims of Colombian paramilitary violence.
“It was a partnership,” he said. “I’ve talked to the commander and sub-commander … of AUC units in Colombia. They got calls all the time from managers of the banana plantations to handle various security matters.”
The SLC invited plaintiff lawyers to share information on the company’s activities in Colombia. As of February, those lawyers had not provided the SLC with “any factual information,” the SLC report indicated.
“There is no evidence, documentary or testimonial, that any Chiquita personnel believed the payments were made for the purpose of supporting either right-wing or left-wing groups,” said Chiquita spokesman Ed Loyd. “The SLC’s factual findings bear out what the company has said all along. The payments were necessary to protect the lives of our employees.”
Apart from liability issues, some argue the SLC report points to a need for legislation to clarify the responsibilities of U.S. companies doing business abroad. Arvind Ganesan, director of the business and human rights program at Human Rights Watch in New York, said Chiquita executives spent years researching the legality of the payments.
That decision would have been simple “if there were a law that said, ‘You cannot supply material support to a known human-rights abuser,’” said Ganesan. “Maybe the real lesson is, this should have been illegal in the first place.”
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