Reference no: EM132082451

In 2014, the 11th United States Court of Appeals ruled in favor of Chiquita Brands, a Cin-cinnati–based multinational marketer and distributor of food products—widely known for its Chiquita banana brand—which had been accused by 4000 Colombians of supporting paramilitary soldiers who had killed or tortured their relatives. The court ruled on techni-cal grounds that the Colombians could not sue the company under the laws they had cited. “The Alien Tort Statute does not apply extraterritorially,” wrote Judge David Sentelle, and “the Torture Victim Protection Act only applies to actual people, not to corporations.”

The Colombians had sought $7.86 billion in damages, on the basis that Chiquita was responsible for the deaths of 393 victims at the hands of a paramilitary group called the United Self-Defense Forces of Colombia that Chiquita had funded through their payments. The law-suits pointed specifically to a 1997 massacre in which 49 people were tortured, dismembered, and decapitated and another incident in 2000 in which 36 more people were killed.

The lawsuit was ironic, because Chiquita had originally made the payments to the para-military group to protect its Colombian employees from harm—not to put people at risk. However, once the payments had been made, Chiquita had no control over what the out-law group did with the funds—which it had apparently used to terrorize other people in the community. “The principle upon which this lawsuit is brought,” said the Colombians’ attorney Jonathan Reiter, “is that when you put money into the hands of terrorists, when you put guns into the hands of terrorists, then you are legally responsible for the atrocities, the murders and the tortures that those terrorists commit.”

Chiquita’s problems began in the early 2000s, when the United Self-Defense Forces of Colombia attempted to extort substantial payments from the company to help fund the group’s operations. The paramilitary group made it clear that if the company did not make the payments Chiquita’s employees would be at risk. The company’s managers took these threats seriously, because they were aware that in 1995 the paramilitary group had been responsible for bombing Chiquita’s operations and murdering 17 banana workers, who had been gunned down on a muddy soccer field.

Chiquita’s mission emphasized a strong sense of ethical performance and social respon-sibility. It stated that it wanted “to help the world’s consumers broaden mindsets about nutri-tion and bring healthy, nutritious, and convenient foods that taste great and improve people’s lives.” Therefore, it was not surprising that Chiquita’s management also wanted to protect its employees and ensure their safety while working for the company. In a handwritten note, a Chiquita executive said that such payments were the “cost of doing business in Colombia.” The company agreed to make the payments demanded by the paramilitary group, but hid the payments through a series of questionable accounting actions. From 1997 through 2004 Chiquita paid monthly “protection payments” totaling more than $1.7 million.

After the September 11, 2001, terrorist attack in the United States, the U.S. Government declared the Colombian paramilitary group to be a terrorist organization. In February 2003, a Chiquita employee informed a senior Chiquita officer that the company’s protection pay-ments were illegal under the new U.S. terrorism laws. Chiquita officials met with their attor-neys in Washington, DC, and were advised to stop the payments to the terrorist group. Yet the company continued to make the protection payments, amounting to an additional $825,000.

In the minds of the Chiquita’s executives, stopping the payments would risk the lives of their employees. Chiquita’s executives also considered but rejected the option of withdraw-ing operations from Colombia. But in a surprising move in April 2003, Chiquita decided to disclose to the Department of Justice that the company was still making payments to the Colombian paramilitary group. The company told the government that the payments were made under the threat of violence against them and their employees.

The Justice Department informed Chiquita that these payments were illegal, yet the company continued to make the payments. In 2007 Chiquita Brands International pleaded guilty to one count of the criminal charge of engaging in transactions with a designated global terrorist group and agreed to pay a $25 million fine.

In explaining its actions, a company spokesperson stated that “Chiquita and its employ-ees were victims and that the actions taken by the company were always motivated to protect the lives of our employees and their families.” He added, “Our company had been forced to make protection payments to safeguard our workforce. It is absolutely untrue for anyone to suggest that these payments were made for any other purpose."

1. Do you agree with the 11th U.S. Court of Appeals ruling that cleared Chiquita of any liability for the victims killed by the paramilitary group that Chiquita funded? Construct an ethical argument that supports your view.

2. Using each of the four methods of ethical reasoning (see Figure 5.6), was it ethical or not for Chiquita to pay the terrorist organization when payments were demanded in the early 2000s?

3. Should the U.S. ban against supporting terrorist groups, imposed after the September 11, 2001, attacks in the United States, be applied in this situation? Why or why not?

4. Is there anything that Chiquita could have done to protect its employees adequately without paying the terrorists?

5. Should Chiquita be assessed a penalty that puts the firm out of business for their actions?