Despite warnings about the legal and ethical dangers of making protection payments to Colombia's right-wing paramilitaries from a member of its board of directors and one of its outside lawyers, Chiquita Brands International pursued the practice, U.S. court documents show.
The payments to the United Self-Defense Forces of Colombia, or AUC as it's known by its Spanish acronym, went on for 28 months after the Bush administration declared AUC a specially designated terrorist organization and vowed to go after anyone who funded such terrorist groups.
On March 19, Cincinnati-based Chiquita, one of the largest fresh-produce companies in the world, pleaded guilty to engaging in transactions with a specially designated global terrorist and agreed to pay the government a $25 million fine over five years.
A prosecution document filed in federal court in the District of Columbia provides intriguing details about the debate over the payments that went on inside a company that owns one of the best-known brand names in the world.
The details laid out in the document show top Chiquita executives and most board members ignored the risks involved and even assumed that violation of the law would be a civil, rather than criminal, matter:
In September 2000, Chiquita's audit committee, composed of board members, heard about the payments. The committee took no action.
The Bush administration designated the AUC and the leftist guerrillas as terrorist organizations in September 2001, making it a crime to provide support or money to one of those groups. At that time stories about the designation appeared in both the Colombian and Cincinnati press.
In September 2002, a Chiquita employee read an alert about the designation on a password-protected subscription service.
In 2003, Chiquita consulted about the payments with an unidentified Washington attorney who shot back e-mails such as this one on Feb. 26: ``Bottom line: CANNOT MAKE THE PAYMENT.''
Two months later, when Chiquita executives reported to the full board of directors that the company was still making payments, one board member objected and the directors agreed to disclose the payments to the U.S. Justice Department.
Company executives expected no sanctions and the payments continued until Feb. 4, 2004.
At one point one Chiquita executive told the Washington attorney: ``Just let [the U.S. government] sue us.''
Corporate ethics experts said they had a hard time understanding why directors took no action.
''To be engaging in activities that are almost certainly illegal . . . at the board level is almost staggering,'' said Beth Young, a senior research associate at the Corporate Library, a Portland, Maine-based corporate ethics groups.
But Chiquita, in a March 14 statement from its chairman and chief executive, Fernando Aguirre, said the company was motivated by its ''good faith concern for the safety'' of its employees and called the plea agreement a ''reasoned solution to the dilemma'' Chiquita faced.
Aguirre, who was named president and CEO of Chiquita in January 2004, said the company voluntarily disclosed the payments ``shortly after senior management became aware that these groups had been designated as foreign terrorist organizations.''
Under its plea agreement, Chiquita agreed that it would cooperate with any continuing investigation of the company executives or officers involved.
The prosecution document lists 10 individuals as ''relevant persons,'' identified only by letters of the alphabet. The people including high ranking officers, executives, a member of the board of directors and employees at Chiquita and Bananos de Exportación (Banadex), the highly profitable Colombian subsidiary where the payments to the outlawed paramilitaries were made.
But the name of one individual is known. The Sun-Times Media Group's Chief Executive and President Cyrus J. Freidheim -- Chiquita's CEO from 2002-2004 -- was forced to disclose to his current firm that he is part of a group of current or former Chiquita employees targeted for investigation if Justice decides to pursue charges against individuals.
In 2005, Chiquita considered moving its corporate headquarters out of Ohio, with South Florida among the contenders. But the company ultimately decided against the move. Chiquita Fresh North America has operations at Port Everglades.
Prior to 1997, Chiquita had made protection payments to the Revolutionary Armed Forces of Colombia and the National Liberation Army, but this was before such payments were a crime.
It was not the first time that Chiquita's operations in Colombia had run afoul of U.S. laws. In 2001, the company agreed to pay a $100,000 fine to settle U.S. Securities and Exchange Commission charges that it improperly concealed a $30,000 payment made to a Colombian customs official in 1996. The company had discovered the payment in a 1997 audit and fired several employees, but it did not notify the SEC.