U.S. companies must be cautious in dealing with foreign militia groups as the government cracks down on payment schemes.
When we think of the war on terror, we think of American business as an ally of the U.S. government, but when it comes to doing business in a conflict zone like Colombia or Nigeria, some companies have straddled the line—paying off or otherwise supporting outlaw groups that have been listed as terrorist organizations. The government is now aggressively going after businesses that have engaged in these practices.
Take the case of Cincinnati-based Chiquita Brands International. Chiquita admitted that for more than six years starting in 1997, it handed over $1.7 million in cash and checks to local commanders of the right wing United Self-Defense Forces of Colombia (AUC). The AUC, disbanded in 2006, imposed a reign of terror and operated a thinly disguised protection racket in northern Colombia. In June, Chiquita Brands International agreed to pay a $25 million fine to the U.S. Justice Department after pleading guilty to “engaging in transactions with a specially designated global terrorist.” Chiquita also agreed to cooperate in an ongoing investigation.
Court documents state that even before that Chiquita paid undisclosed amounts of money to two left-wing guerrilla groups starting in 1989 until the AUC drove them out of the region in 1997. A company official told Security Management that the company was not solely motivated by profit; executives reasoned that by pulling out, Chiquita might weaken the regional economy, worsen the plight of local people, and destabilize Colombia, an ally of the United States. But to continue operating in the region, it had to pay off AUC warlords.
The money kept flowing even after the U. S. government declared the AUC a terrorist organization in 2001. In 2003, Chiquita executives sought U.S. government guidance on the matter. But even after government officials and the company’s own outside legal counsel told it to stop, Chiquita kept up its payments.
Then in January 2004, Fernando Aguirre joined Chiquita as CEO and immediately ordered the payments to stop. In June of that year, he sold Chiquita’s Colombian subsidiary to local investors, though the company still imports Colombian bananas. Because Chiquita cooperated with government investigators, the government dropped criminal charges against ten senior executives implicated in the affair. They include Chiquita’s former CEO, its former general counsel, and a former board member.
The law is fairly unambiguous when it comes to these types of payments, says Jay Robert Brown, a Denver University corporate governance expert. “There is some wiggle room for companies when they are defending their employees. But [Chiquita] was doing this for a long time, paying off these violent groups,” he notes.
Chiquita is far from alone. A growing number of cases being brought against major U.S. corporations by the government and advocacy groups highlights how common the practice has been, particularly in regions where fighting has engulfed the operations of U.S. and European multinationals.
As these cases go forward, prosecutors and plaintiffs are having more success in American courts than before. This is forcing companies to rethink the way they handle security in far-flung trouble spots.
Some companies have been accused of going beyond simply paying bribes or protection money. In August, a U.S. District Court judge found evidence that Chevron Nigeria Limited (CNL) personnel “were directly involved in the attacks” against villagers in the country’s volatile, oil-rich Niger Delta region a decade ago. The judge rejected Chevron’s claims for dismissal and allowed the case to go forward.
The judge further said there is evidence that “CNL transported the GSF [Nigerian government security forces], CNL paid the GSF; and CNL knew that GSF were prone to use excessive force.”
A trial date has yet to be set. The villagers are basing their claims on two U.S. federal laws: the 1789 Alien Tort Claims Act (ATCA) and the Racketeer Influenced and Corrupt Organizations Act (RICO). They have also referenced California state law.
ExxonMobil is fighting accusations by 15 employees in the autonomous Aceh province of Indonesia that company security guards kidnapped, tortured, and murdered local people in 2001. The suit claims that the guards were working for the company at the time and acted with the knowledge of ExxonMobil executives.
A Washington, D.C., court rejected ExxonMobil’s motion to throw out the case, which it alleges negligent hiring and supervision of the security forces, making the company potentially liable for assault, battery, and wrongful death. The court ruled that the company could be held liable for actions of the guards even if they were hired as independent contractors. The case goes to trial in June 2008.
Earlier this year, the United Steel Workers (USW) and the International Labor Rights Foundation (ILRF), based in Washington, D.C., succeeded in bringing a landmark case to trial against Drummond Company Inc., a Birmingham, Alabama, coal company. For the first time, a U.S. federal court agreed to hear a case under ATCA against an American corporation for its actions in a foreign country.
The USW and ILRF have accused Drummond of paying off militias that in 2001 killed three union leaders at its mine in northern Colombia. A jury acquitted Drummond in July, but the USW and ILRF are filing an appeal. Gerald Fernandez, a USW official, says, “Our appeal will be based on the fact that the judge was quite hostile and disallowed four witnesses who have firsthand knowledge of meetings with the paramilitaries.” He says these witnesses saw Drummond representatives give money to paramilitary leaders. The judge said the witnesses had missed deadlines to appear before the court.
Companies operating in conflict zones have a long history of seeking accommodation with armed groups because not doing so could put employees’ lives at risk and jeopardize the company’s investment. U.S. officials now say this practice is no longer acceptable.
The Chiquita case was intended to send a message to corporate America. Justice Department spokesman Dean Boyd said, “If the only way for a company to conduct business in a location is to do so illegally, then the company probably shouldn't be doing business there.”
Chiquita’s legal troubles may not be over. Terry Collingsworth, ILRF’s lead counsel, is acting for Chiquita’s 144 plaintiffs in a civil suit against the company under ATCA and the Torture Victims Prevention Act. The suit says workers suffered “systematic intimidation and murder” at the hands of paramilitaries “working as agents of the defendants.”
The war on terrorism caused the U.S. government to prioritize these violations. Announcing the fine, prosecuting U.S. Attorney Jeffrey A. Taylor said paying terrorists is a crime.
As for the ultimate impact on business, Taylor noted that, “like adjustments that American businesses made to the passage of the Foreign Corrupt Practices Act decades ago, American businesses, as good corporate citizens, will find ways to conform their conduct to the requirements of the law and still remain competitive.”