Enabling Terrorism, Ensuring Profit

Victims of Colombian paramilitary violence sue Cincinnati-based Chiquita

Dec 8, 2010 at 2:06 pm

In what could be a lull before a legal maelstrom for Cincinnati-based Chiquita Brands International, attorneys involved in several pending federal lawsuits against the company expect a Florida judge to soon decide to let their cases proceed.

The cases, consolidated before U.S. District Judge Kenneth Marra in the court for the Southern District of Florida, charge the owners of the giant produce firm of helping fund Central American paramilitary groups through much of the 1990s, fueling the groups' terrorist activities.

Chiquita has asked Marra to dismiss the cases, which otherwise could cost the company billions of dollars.

"We believe we have very strong defenses in these suits and that they are without merit. As such, we will continue to strongly defend our position," says Ed Loyd, Chiquita's director of corporate communications.

"We absolutely deny the allegations made in these suits; our actions were always motivated to protect the lives of our employees and their families and we were forced to make payments to left- and right-wing paramilitary groups," Loyd adds.

Critics counter that, instead of paying money to terrorist groups, Chiquita could have reported the threats to the Colombian government and stopped or scaled back operations in the affected regions.

The multiple cases — headlined by three in particular — were born from Chiquita's admission three years ago to funding one group, the Autodefensas Unidas de Colombia (AUC) for years even after the U.S. government classified it as a terrorist organization. The AUC and rival group, Fuerzas Armadas Revolucionarias de Colombia (FARC), carried out systematic kidnappings and massacres during Colombia's long-running guerilla war throughout the '90s and the first part of this decade.

In its 2007 plea agreement with the U.S. Justice Department, Chiquita admitted to paying the groups — reportedly more than $1.7 million from 1997 to 2004 alone — although it claimed it did so only to protect its workers and self-reported the payments to the feds after learning of the group's watch-list status.

"We condemn the actions of all groups that perpetuate violence and we have deep consideration and respect for all victims of paramilitary violence, but our employees were victims as well," Loyd says. "More than 50 of them were brutally killed, and so we made payments solely to protect their lives."

A dark history

Chiquita traces its history to 1870, when Lorenzo Dow Baker purchased 160 bunches of bananas in Jamaica and sailed them to Jersey City in 11 days, where he sold them for a profit. Baker eventually started a partnership with investors and formed the Boston Fruit Co.

In 1899 that firm merged with some railroads owned by Henry Meiggs to form United Fruit Co., a name that became infamous throughout South America.

In December 1928, some of the firm's workers were killed by the Colombian military after going on a month-long strike to protest harsh working conditions on its plantations. Among their demands, deemed unreasonable by the company, were written contracts, eight-hour working shifts and six-day work weeks.

The horrific incident became known as “Matanza de las Bananeras,” or the Banana Massacre, and was recounted in a fictionalized version in One Hundred Years of Solitude, an epic novel by Gabriel Garcia Marquez.

To this day, it remains disputed whether United Fruit asked the troops to intervene. Also, accounts vary widely about how many workers were killed, ranging from about 50 to nearly 2,000.

Chiquita has had other brushes with the law over the years.

They include a 1975 federal investigation in which it was determined the company had paid a $2.5 million bribe to the Honduran president to reduce taxes on banana exports. That incident, along with $40 million in losses stemming from a hurricane a year earlier, prompted CEO Eli M. Black to commit suicide by jumping from a 44th-floor window at the company's headquarters in New York.

Also, the European Union (EU) conducted an inquiry in the 1990s that alleged Chiquita abused its dominant position in the fruit market to gain an unfair advantage. The company's official history recalls this incident as the EU “impos(ing) illegal quotas and tariffs on bananas imported from Latin America, (taking) away over half of our most profitable market.”

After Black's suicide, local businessman Carl Lindner Jr. bought into the company, ultimately taking control in late 1984 and moving its headquarters to Cincinnati in 1985.

The firm changed its name to Chiquita in 1990 “to take advantage of global name recognition,” according to the company's history.

Legal troubles mount

Chiquita, which claims profits of nearly $4 billion annually, ended up paying a $25 million fine in the 2007 agreement, only one-third of the fine the Justice Department had originally sought. But the plea deal opened the door to civil lawsuits, which have escalated since.

Perhaps partially due to the uncertainty, Chiquita's business has been troubled lately. It posted a third quarter loss of $8 million. Also, board member Durk Jager — the ex-Procter & Gamble CEO — resigned from Chiquita's board in November, stating the firm “lacks the capabilities to address basic operational requirements for a sound business."

In March 2008, a civil class action suit was filed in Southern Florida District Court by New Tribes Mission of Sanford, Fla., and the families of five American missionaries who worked in Panama, just across the border from Colombia. The missionaries had been kidnapped by FARC, held hostage and ultimately murdered by the guerillas that plaintiffs allege Chiquita had paid.

Earlier this year, the judge denied Chiquita's request to dismiss the case.

In Marra's ruling to allow the case to proceed, he said although Chiquita's payments to FARC might not have been acts of terrorism themselves, the plaintiffs had shown sufficient evidence that the company's money had enabled terrorist acts.

Meanwhile, a suit with larger financial implications for Chiquita was brewing. In April, 242 Colombian victims of the violence filed suit against the company. The plaintiffs, including surviving family members of the rebel groups' murder victims, sued under a 1992 law allowing non-Americans to sue U.S. firms over terrorism-related deaths abroad. Their complaint claims that Chiquita provided material support and resources to the AUC, facilitating terrorism.

Because of the large number of plaintiffs, the suit asks for $1 billion in compensation from Chiquita, along with unspecified punitive damages.

While waiting for Marra's decision on whether that case can continue, however, attorneys recently filed an amended complaint. The amendment added more plaintiffs to the suit, bringing the current total to 888.

"We've just added 600 new plaintiffs,” says attorney Lee Wolosky, a former White House counter-terrorism official in both the Clinton and Bush administrations and currently an attorney with Boies, Schiller & Flexner, a New York law firm. "There will be more. The scope and magnitude of this litigation and stakes for the defendant are growing, rather than diminishing."

The latest of Chiquita's legal woes is a lawsuit involving the murder of a U.S. veteran by FARC militants in 2003, and the kidnapping of several others who were held in captivity for almost five years.

The plaintiffs were aboard an aircraft that was shot down by FARC militants in 2003. The planes' pilot, retired U.S. Army veteran Thomas Janis, was immediately executed. The guerillas then marched the survivors into the jungle, holding them hostage while demanding ransom. Ultimately, they were rescued in July 2008.

Five of Janis' family members are also listed as plaintiffs. Their lawsuit seeks unspecified damages.

'Regular, repeated and knowing'

Chiquita's defense in all the recent cases — particularly in light of its 2007 plea and the settlement this past January with shareholders who sued the company because of the admission — is troubling, says Wolosky.

In the shareholder agreement, the company paid $4 million in legal fees for the plaintiffs and adopted a board resolution pledging the company won't authorize "illegal payments to terrorist organizations” and “bribes to foreign officials."

"Chiquita has already admitted to engaging in criminal conduct that violated federal law by making systematic financial payments to a foreign terrorist organization," Wolosky says, "yet it has refused to provide compensation to the victims of terrorist atrocities made possible by its regular, repeated and knowing financial support."

While attorneys on both sides of the various cases await Marra's ruling, another court battle could have major legal and financial ramifications for Chiquita as well. A case in California federal court named Dole Food Co. as defendant in a similar complaint of paramilitary funding, and testimony painted an ugly picture of the company's hand in Colombian violence. During testimony by former AUC members, Chiquita is being painted with the same brush.

Jose Gregorio Mangones — who is also known as Carlos Tijeras — was once a commander in the AUC. In sworn affidavits, he testified earlier this year that both Dole and Chiquita had "an open, public relationship" with AUC. He claims that after both companies hired the AUC to drive out the local FARC factions, they continued to pay for "security services" which sometimes involved kidnappings, killings and harassment of local labor activists determined by the companies to be "security problems."

Attorneys for Dole deny Mangones' claims, noting he's received a reduced sentence for his crimes in exchange for testimony. Although Chiquita isn't named in the California suit, legal experts say it could prompt further claims against the local banana company.

In September, a state court judge dismissed the case against Dole on on statute of limitations grounds. Also, she ruled that Mangones' declaration was "riddled with inaccuracies" and said Dole likely would've won at trial.

Attorneys for the plaintiffs say they will refile the case in federal court.