Reference no: EM131471016

Discussion Case:

Chiquita Brands:

Ethical Responsibility or Illegal Action?

In the early 2000s, Chiquita Brands International, a Cincinnati–based multinational marketer and distributor of food products—widely known for its Chiquita banana brand found itself in the middle of a crisis in its Latin American operations. The company was confronted by a local armed paramilitary group, the United Defense Forces of Colombia, which 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 believed 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 responsibility. It stated that it wanted “to help the world’s consumers broaden mindsets about nutrition 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 payments were illegal under the new U.S. terrorism laws. Chiquita officials met with their attorneys 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 withdrawing 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.

Chiquita’s troubles did not end when it settled the charges filed by the Justice Department. In 2007, new lawsuits were filed under the Alien Tort Statute, a 222-year-old law that allows foreigners to sue a U.S.–based company in American federal courts if their claims involve violations of U.S. treaties. The lawsuit claimed that Chiquita was responsible for the deaths of 393 victims at the hands of the Colombian terrorist group that Chiquita funded through their payments and demanded damages of $20 million per victim, a total of $7.86 billion. The lawsuits 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 principle upon which this lawsuit is brought 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,” said attorney Jonathan Reiter.

Additional lawsuits were filed in 2011, where the names of 4,000 victims were submitted, each targeting Chiquita due to the company’s support of the Colombian terrorist paramilitary group. Attorney Terry Collingsworth, who helped file the lawsuits on behalf of the Colombians, said, “A company that pays a terrorist organization that kills thousands of people should get the capital punishment of civil liability and be put out of business by punitive damages.”

A Chiquita spokesperson responded, “We reiterate that Chiquita and its employees were victims and that the actions taken by the company were always motivated to protect the lives of our employees and their families.” Michael Mitchell, Chiquita’s director of com- munications 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. Chiquita has already been the victim of extortion in Colombia.

We will not allow ourselves to become extortion victims in the United States.”

Please Answer Discussion question

1. How should Chiquita respond to the new lawsuits claiming that the company is responsible for the deaths of victims at the hands of the terrorist group the company helped fund?