The ground-breaking civil liability verdict against Chiquita Brands International is a cautionary tale for compliance work in Latin America, where decades ago the banana grower paid protection fees to a terrorist group.
Chiquita plans to appeal the bellwether ruling, while plaintiffs’ attorneys hope to reach a global settlement for hundreds of families whose loved ones were murdered by the United Self-Defense Forces of Colombia (AUC).
“I do think this case will have a broad impact. My fervent hope as a human rights lawyer is that we won’t have to file these sorts of cases,” said Marco Simons, general counsel for EarthRights International, which represents 500 individuals in the claims against Chiquita.
The class action suit was filed after a 2007 U.S. criminal case in which Chiquita pleaded guilty to financing AUC and agreed to pay a $25 million fine. Chiquita voluntarily reported the payments, which totaled at least $1.7 million, to the U.S. Department of Justice in 2003—two years after the U.S. government classified the AUC as a terrorist group.
Plaintiffs’ attorneys argued in Florida that Chiquita’s payments to the AUC amounted to a partnership that protected the company’s business in conflict-ridden banana-growing regions of Colombia.
Defense lawyers for Chiquita countered that the company was being extorted alongside other multinationals that operated in Colombia during the South American country’s decades-long civil conflict and that Chiquita paid a heavy price by self-reporting those payments to the U.S. Department of Justice.
“Self-reporting is not supposed to be a ‘Get Out of Jail Free’ card,” countered Simons. “If anything, Chiquita got off easy because they self-reported.”
Plaintiffs’ attorneys said that the U.S. Department of Justice rarely prosecutes companies that self-report, suggesting that Chiquita’s behavior was so egregious that it warranted further investigation.
The class action case, heard in West Palm Beach before U.S. District Judge Kenneth Marra of the Southern District of Florida, is the result of multiple civil suits filed in federal courts across the U.S. that sought compensation for hundreds of AUC victims in Colombia.
Gruesome Events
The AUC was formed by wealthy landowners who armed themselves against the Revolutionary Armed Forces of Colombia, a Marxist guerrilla group known as the FARC, which kidnapped and killed many Colombians over several decades.
The AUC did not attack multinational companies or their executives, the plaintiffs argued. Rather, the group often killed individuals they believed to be aligned with leftist groups or who they otherwise considered undesirable, such as a young man accused of stealing supplies at a banana farm.
Several of the victims in the first bellwether trial against Chiquita were banana workers who were murdered in front of their own children. Over the course of six weeks, the Florida jury heard gruesome details of abductions, stabbings and shootings allegedly committed by the AUC.
The jury awarded family members of eight victims more than $2 million each, for a total payout of $38.3 million. The next round of bellwether cases against Chiquita is scheduled for July.
Roughly 4,500 Colombian families are seeking compensation from Chiquita in U.S. courts for the company’s role in funding the AUC.
“Chiquita got what amounted to an illegal private army,” said Jack Scarola, a prominent Florida attorney who gave opening and closing arguments for the plaintiffs’ firms.
The win is being touted as the first time a U.S. court has held a U.S. company accountable for human rights violations abroad. Since the case began nearly two decades ago, Chiquita has moved its corporate headquarters to Switzerland. Its banana division operates out of Florida.
The company, formerly the United Fruit Company, has a troubled history in Central America, where its reputation for exploiting workers and manipulating governments more than a century ago led American writer O. Henry to label those countries “banana republics.”
In a statement, Chiquita said: “The situation in Colombia was tragic for so many, including those directly affected by the violence there, and our thoughts remain with them and their families. However, that does not change our belief that there is no legal basis for these claims. While we are disappointed by the decision, we remain confident that our legal position will ultimately prevail.”
Self-reporting
The Florida case against Chiquita raises significant considerations for corporate attorneys who advise U.S. companies that do business in Latin America. The region is plagued by violence and corruption, making payments to third parties sometimes necessary to guarantee security.
“If you want to do business in a complex country in Latin America, you may need to navigate minefields,” said Barbara Llanes, a partner at Miami’s Gelber Schachter & Greenberg, who defends individuals and companies accused of white-collar crimes. Previously, Llanes represented the Department of Justice in the U.S. and Latin America.
Lawyers said there are ways to make payments that are more compatible with U.S. ethics and conventions such as donations to nonprofits that are trying to improve the local community or to police agencies.
“Compliant companies find ways to be compliant,” said Ruti Smithline, co-chair of the investigations and white-collar criminal defense group at Morrison & Foerster and the Colombia-born co-chair of the firm’s Latin America desk.
One takeaway from the trial, Smithline said, is for companies to strengthen their internal compliance programs so that they can mount a better defense when problems arise.
Whether or not to self-report to the U.S. Department of Justice is another matter.
“Self-disclosure has always been one of the most difficult decisions that a company has to make,” said Smithline, adding that the “tangible benefits” of those disclosures are questionable.
By stepping forward to report misconduct, companies hope for leniency from authorities. Yet such disclosures often open a Pandora’s box.
Llanes agrees that self-reporting is treacherous territory. “When a company self-reports, they lose control of the process. It’s then in the hands of the DOJ,” she said.
The Chiquita verdict, if it stands, raises the possibility that U.S. companies could be held more broadly accountable for financing a bad actor overseas.
Not all of the victims named in the Florida case were directly linked to Chiquita. That distance could be unsettling for companies doing business in difficult places, lawyers said.
