Chiquita Brands International, Inc. Pleads Guilty to Doing Business with a Terrorist Organization

March 23, 2007

On March 19, 2007, Chiquita Brands International, Inc. pleaded guilty to one count of doing business with a terrorist organization. James Thompson, senior vice president and general counsel for Chiquita, entered the plea on behalf of the company in the U.S. District Court for the District of Columbia, pursuant to a written plea agreement. 

According to the plea agreement, beginning in 1997, Chiquita paid approximately $1.7 million to the Autodefensas Unidas de Colombia ("AUC," translated as the United Self-Defense Forces of Colombia), a right-wing paramilitary organization, in two regions where the company maintained banana-producing operations. Reportedly, the AUC is responsible for some of the most brutal massacres that have occurred during the country’s ongoing civil war, as well as a significant amount of drug trafficking. In September 2001, the State Department officially designated the AUC as a "foreign terrorist organization." The Treasury Department followed suit in October of that year, naming the AUC a "specially designated global terrorist." Despite these well-publicized designations that make it a crime for U.S. companies to engage in transactions with the designees, Chiquita continued to make payments to the AUC through Banadex, its Colombian subsidiary, and other intermediaries. Many of the payments were made by check and disguised in the company’s books and records as "security" payments. In June 2002, Chiquita began making direct cash payments to the AUC and adopted new procedures to conceal this activity. Several unidentified executives allegedly reviewed and approved the payments.

In early 2003, a Chiquita employee notified a company executive that the AUC was a designated terrorist organization. The company continued to make payments to the AUC, even after consulting outside counsel, who strongly recommended immediate cessation of the unlawful payments. A senior officer and board member subsequently disclosed the situation to Chiquita’s board of directors, which elected to notify the Department of Justice of the payments on April 24, 2003, and cooperate with any subsequent investigation. Following this voluntary disclosure, Chiquita still continued to make payments to the AUC until February 2, 2004. It then sold the Banadex subsidiary to a Colombian purchaser in June of that year. The company maintains that it made these payments in good faith to protect its workers from violence threatened by the AUC, noting that at least one employee has been killed in Colombia. 

Under the plea agreement, Chiquita must pay a $25 million fine in five installments, implement and maintain an effective compliance and ethics program, and cooperate with government authorities in any ongoing investigation. Chiquita will also be on probation for five years. The court must still approve the terms of the plea agreement at a sentencing hearing scheduled for June 1, 2007. If the court rejects the agreement, Chiquita may face a fine of nearly $100 million. 

The plea agreement does not prevent future criminal prosecution of the unidentified individual executives who reviewed and approved the payments, and press reports have indicated that Colombian authorities may seek extradition of those individuals to Colombia for criminal prosecution.

Prosecutors have also alleged that Chiquita made payments to two other terrorist organizations in the past — the National Liberation Army and the leftist Revolutionary Armed Forces of Colombia.  

For further information, please contact the Gibson Dunn attorney with whom you work, Judith A. Lee (202-887-3591, [email protected]), Daniel J. Plaine (202-955-8286, [email protected]), Jim Slear (202-955-8578, [email protected]), Patrick Speice (202-887-3776, [email protected]) or any member of Gibson, Dunn & Crutcher’s International Trade Regulation and Compliance Practice Group

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