15 Mar What Did Chiquita Do Wrong?
As has been widely reported, Chiquita Brands International has been fined $25 million for paying designated terrorist groups in Colombia not to attack its workers:
US authorities charged Chiquita Wednesday with paying 1.7 million dollars between 1997-2004 to the United Self-Defense Forces of Colombia (AUC), a right-wing paramilitary group on the US list of terrorists.
Chiquita, through its subsidiary C.I. Bananos de Exportaction S.A. (Banadex), paid the AUC in exchange for protection in the banana-producing areas of Uraba and Santa Marta, Colombia, court documents said.
In the past, the company had also made payments to leftist rebels of the Revolutionary Armed Forces of Colombia (FARC) and National Liberation Army (ELN), both also listed as terror groups, US prosecutors said.
Chiquita, which sold Banadex in 2004, said in a statement it had voluntarily disclosed to the US Department of Justice in 2003 that its subsidiary “had been forced to make payments to right- and left-wing paramilitary groups in Colombia to protect the lives of its employees.”
“The payments made by the company were always motivated by our good faith concern for the safety of our employees,” Chiquita chief executive officer Fernando Aguirre said in the statement issued Wednesday.
Am I missing something? I’m not exactly a fan of multinational corporations that are involved in the fruit business in Central and Latin America — and I particularly loathe Chiquita, which began life as the notorious United Fruit Company. But is it really wrong for a multinational that, for better or worse, is doing business in a dangerous area to pay paramilitary and rebel groups not to attack its workers? It’s the worker who suffers when that happens, not the corporation — which will simply replace the victim with someone equally exploitable. It’s not like Chiquita was taking sides: as the article notes, the corporation was paying both right-wing and left-wing groups for protection. And I doubt that the Colombian government — which, not surprisingly, described the fine as a “magnificent signal” — would protect Chiquita’s workers from the far more bloodthirsty AUC, given the close ties between the right-wing paramilitary organization and the government itself. So what, exactly, did Chiquita do wrong?
Readers?
Dear Kevin,
As I am not expert on particular case scenario in Colombia, I can only offer some general comments on potential issues arising from your blog post.
The question is whether one can construct an argument that a company has obligation not to cooperate with paramilitary groups, which have in the past committed serious human rights abuses as it has been reported concerning paramilitary groups in parts of Colombia? Many advocate that obligation not to cooperate may require a corporation either to withdraw its business from dangerous areas where widespread and systematic human rights abuses occur or to take measures to ensure that its corporate operations do not amount to complicity in the human rights abuses. Who can for certain claim that those paramilitary groups have not attacked workers or local population even when the company has complied with blackmailing request of paramilitaries? Question might be posed differently – is it really right for a multinational that, for better or worse, is even doing business in areas with very poor human rights record? It is a difficult question but protection of workers and local population should have priority over any other interest.
Dear Jernej,
Your points are very well taken. I completely agree that the best solution would be for the Chiquitas of the world not to do business in dangerous areas (or anywhere, for that matter…). And you are absolutely right to point out that the payments (a) might not be effective, and (b) are likely to finance the groups’ bad acts. That said, I still feel sorry for the workers who are the innocent victims — and hope that the payments provide them with at least some protection.
Kevin
Hey Kevin, How about the Foreign Corrupt Practices Act?
Would it be all right for a multinational working in Palestine or Iraq to pay Hamas or al Qaeda? I’m not sure the comparison is necessarily valid, but someone in the justice department might.
There is always a certain amount of risk when commenting blind, however, primarily if we can agree that the mere act of trading in Columbia is not a criminal offence (either nationally or internationally) Kevin is posing a perfectly valid question which is is not eaily resolved by Jernej’s response. Company’s have a duty of care towards their employees – if this problem is approached through an either/or – black/white prism then the simple choice is between ceasing trading or continuing to trade with your staff at risk. Perhaps, because Chiquitas is a multinational company the moral/ethical choice is simple but would we arrive at the same conclusion if a hospital had been paying both sides not to attack their workers?
Mr. Spiro mentions the Corrupt Practices act, and I think he’s near to the point.
If I pay a local politician to facilitate construction of my plant, that’s bribery. Am I to be forgiven the exact same offense if he simply threatened precise harm upon my employees if he was not paid?
Again, I think that the formulation provided above is far too simplistic to capture all the shades of grey that lie between. The Corrupt Practices Act prohibits paying local or national officials in a direct way to facilitate some element of your business, but other types of conduct that may broadly speaking have a similar impact are not prohibited. For example, if say a company built a local community school or hospital (which benefits a politician locally or nationally); or returning to the terrorist example sponsored a special gunshot treatment unit in a hospital or donated to the (barely legal) political wing of the terrorist group. Would these acts pass the legality test as there were no cash payments? Would they pass the ethical test? Are these “sweeteners” more justifiable if they are made to protect the safety of the employees rather than facilitate growing/expansion of the business?
The legal analysis is really quite simple. AUC is designated by the Treasury Department Office of Foreign Assets Control (OFAC) as a “foreign terrorist organization,” a “specially designated global terrorist,” and a “specially designated narcotics trafficker.” As a result, three different Executive Orders and their implementing regulations prohibit US persons from making payments to AUC. (See http://www.ustreas.gov/fac).
Indeed, it can be said that what Chiquita really did wrong is to ignore the advice of its lawyer. I’ve seen press reports to the effect that Chiquita continued making payments to AUC after receiving legal advice to the effect that “Bottom line: You cannot make these payments.” No doubt the intentionality evidenced by making payments after receiving such advice contributed to the severity of Chiquita’s punishment.
Still, this leaves open the moral and policy question raised by Professor Heller: Should it be illegal for a company to make payments to terrorists/narcotics traffickers when those payments are intended to protect employees from those same terrorists/narcotics traffickers? But this issue is not uniquely international — municipal criminal law also must grapple with protection payments to criminal organizations.