Chiquita Brands International Inc. said Wednesday that it would pay a $25-million fine to settle a long-running Justice Department investigation of whether it knowingly paid "protection" money to Colombian paramilitary and rebel groups designated by the U.S. as terrorist.
In a filing with the Securities and Exchange Commission, the Cincinnati-based fruit and vegetable conglomerate also said it would cooperate with the government "in any continuing investigation into the matter."
The agreement to cooperate is significant, one senior Justice Department official said, because investigators continue to focus on whether several current or former high-ranking company officials knowingly engaged in a scheme to pay at least $1.7 million to a right-wing paramilitary group and a left-wing rebel faction to keep them from targeting Chiquita employees and facilities in volatile parts of Colombia.
Both groups, the United Self-Defense Forces of Colombia and the Revolutionary Armed Forces of Colombia, are on the State Department's list of terrorist organizations and have been engaged in systematic extortion from businesses and local governments for years.
The Justice Department official and other authorities said the Chiquita investigation was the most prominent, and perhaps only, inquiry in which a U.S. corporation is believed to have provided financial assistance to a foreign terrorist organization since the Sept. 11 attacks. President Bush has said repeatedly that any financial supporter of a terrorist group should be prosecuted as severely as any terrorist operative.
"Obviously it's a sensitive case, an important case," said a second Justice Department official. Both men spoke on condition of anonymity, saying they were not authorized to discuss any aspect of the investigation.
Earlier Wednesday, federal prosecutors filed a document of criminal information against Chiquita as a corporation, charging it with "engaging in transactions with a specially designated global terrorist."
Unlike a federal grand jury indictment, a criminal information is traditionally worked out through discussions between prosecutors and defense lawyers, followed by a guilty plea. A hearing has been set for Monday before U.S. District Judge Royce C. Lamberth in Washington.
The Justice Department and the U.S. Attorney's office in Washington had no comment Wednesday on either the criminal filing or the investigation.
Chiquita's chairman and chief executive, Fernando Aguirre, described the plea agreement as "a reasoned solution to the dilemma the company faced several years ago."
Aguirre said in a statement that the "protection payments" were made by the company's Colombian banana-producing subsidiary, which it sold in 2004. The subsidiary had been forced to make the payments to protect the lives of its employees, he said.
"The payments made by the company were always motivated by our good-faith concern for the safety of our employees," Aguirre said.
With annual revenue of approximately $4.5 billion, Chiquita said the fine would not affect its global operations. It is a leading international marketer and distributor of fruits and salads, and is one of the world's top sellers of bananas. The company's stock, which closed Wednesday at $12.75 in regular trading on the New York Stock Exchange, rose 5 cents in after-hours trading.
Chiquita has had a history of controversial dealings in South America that date back decades. Its precursor, the United Fruit Co., was alleged to have worked with the CIA to overthrow an anti-capitalist government in Guatemala, which it feared was a threat to its banana-growing enterprise there, in 1954.
In 1975, a U.S. investigation revealed that the company had bribed the president of Honduras in a scandal that came to be known as Bananagate. And in 1998, the Cincinnati Enquirer published an 18-page special section on Chiquita that alleged a host of questionable business practices and improprieties, including bribing foreign officials.
Chiquita portrayed the articles as unfair and inaccurate and forced the Enquirer to run an apology and retraction and pay a settlement said to be more than $10 million. But critics of the company have noted that it never fully refuted many of the published allegations.
In the 18-page criminal filing submitted Wednesday, prosecutors said that Chiquita officials came to them in 2003 seeking advice on what to do about the payments. But they said that at least several high-ranking company officials knowingly engaged in the practice long after Chiquita's lawyers told them it was illegal and should be stopped.
Prosecutors said Chiquita initially paid protection money to the left-wing rebel group, known by its Spanish-language acronym FARC.
But after the right-wing United Self-Defense Forces of Colombia, known as the AUC, took control of parts of Colombia where Chiquita had massive banana farms, the company began paying that group, according to the court filing.
Those groups and other paramilitary and rebel organizations have been fighting a brutal war over turf and political control, and have been accused of numerous human rights violations. The groups have also been engaged in terrorist attacks, drug trafficking and kidnappings of Americans and corporate officials, usually for lucrative ransoms.
In court documents, prosecutors said Chiquita paid an undisclosed amount of money to the FARC in the 1990s. Then, in 1997, Chiquita began paying the AUC after a meeting between the general manager of its subsidiary and the AUC's leader at the time, Carlos Castano. It continued paying until at least 2004, long after the United States had designated the group a terrorist organization, according to the documents.
Under various U.S. laws, it is illegal for anyone -- an individual or a corporation -- to do business with any designated terrorist entity.
The payments, usually disguised through an elaborate series of financial tricks, "were reviewed and approved by senior executives of the corporation, to include high-ranking officers, directors and employees," the court filing said.
By September 2000, senior executives at Chiquita knew that the corporation was paying the AUC and that it was a violent paramilitary organization, prosecutors said. In April 2002, according to the court filing, the company seated a new board of directors after coming out of bankruptcy and began paying the AUC "according to new procedures established by senior executives."
In early 2003, outside counsel hired by Chiquita was demanding that the company sever its financial relationship with the AUC. "Must stop payments," said a Feb. 21, 2003, communication cited in the court filing.
The payments continued, however, and they were soon reported to the full board of directors, which agreed to disclose the payments to the Justice Department. One board member objected to the payments and urged the company to take immediate corrective action, including withdrawing from Colombia.
But some other company leaders wanted the payments to continue, even if they were illegal and likely to draw Justice Department scrutiny. Two high-ranking company officials told their outside counsel to "just let them sue us, come after us," the filing says.
In late April 2003, Chiquita officials met with Justice Department lawyers, who acknowledged that the issue of continued payments was complicated but said they were illegal and could not continue.
Within two weeks, though, Chiquita officials gave instructions to "continue making payments," the criminal filing said.
Justice Department officials said that because of such acts, they initially considered filing the more serious charge of providing "material support" to a terrorist organization but ultimately decided against it, in part because Chiquita had reported the payments to federal authorities after it became aware of them.