Readers of my other posts about the Chiquita story will have seized on one of the central issues in determining Chiquita’s liability to the wrongful death claimants under the Anti-Terrorism Act and the Alien Tort Claims Act — how close is the relationship is between Chiquita’s payments to the FARC guerillas and the paramilitaries of the AUC, on the one hand, and the kidnappings and murders that resulted?

The federal court hearing the cases, Judge Marra presiding, ruled against Chiquita in the New Times Missionaries case that allegations of substantial payments over a long period of time preceding the kidnappings and murders are sufficient if proven to make Chiquita liable, without more in terms of actual knowledge of these specific acts of violence. Legal observers and the parties hotly debate whether this standard of “causation” is too loose.  As discussed in Part IIIA of this series, Judge Marra ruled that if Chiquita’s payments were a “substantial factor” in the deaths it is sufficient to make Chiquita liable.  Plaintiffs argue that the payments alone are enough, no knowledge of murders, kidnapping, or the means for them are needed.

Chiquita angrily denies any involvement in guns and drugs.  Chiquita says no such evidence turned up in the DOJ investigation.  Chiquita’s Board appointed a Special Committee that found no evidence of anything more than the payments that were admitted, specifically denying, in a footnote, any Chiquita involvement in arms shipments. Read my discussion of the Special Committee report here and the report itself is here.  

But there are detailed allegations, which purport to be drawn from knowledgeable (if questionable) sources, that Chiquita was doing more than making extorted security payments. Former National Security Council official Lee Wolosky, now at Boies Schiller, filed a complaint on behalf of hundreds of plaintiffs against Chiquita in Henao Montes v. Chiquita Brands, No. 0:10-cv-60573 (S.D. Fla.) which is consolidated for pre-trial briefing with Does 1-976 v. Chiquita Brands International, Inc., No. 10-cv-00404-RJL (D.D.C.)).  The complaint alleges that plaintiffs are either survivors of Colombian nationals who were murdered by the paramilitaries of the AUC, or were themselves injured by the AUC in Colombia, and seek to collect damages from Chiquita under the ATS, the Torture Victim Protection Act, 28 U.S.C. § 1350 note, and state tort law.

These plaintiffs come right out and accuse Chiquita of direct involvement in drug and weapons shipments, to demonstrate a close link between the Chiquita payments and other actions, on the one hand, and acts of kidnapping and murder, on the other.  And they cite some pretty bad people, and some pretty serious organizations, as support.

So who’s right? In Part 1 below, I am going to use an old trick of some judges, and hear the Defendant Chiquita’s argument first that the allegations do not measure up to the legal standard. Then, in Part 2, I will set forth in detail many of the operative allegations from the Henao Montes complaint.

You be the judge.

1.

 In response to the Henao Montes complaint, Chiquita filed a motion to dismiss all the cases, arguing:

The individual claims are set out in now-familiar long strings of short, conclusory paragraphs with virtually no detail about any of the alleged incidents and no facts purporting to tie Chiquita to any asserted death or injury.  (My emphasis.)

As to Chiquita’s role in these purported offenses, the Montes plaintiffs allege that

Chiquita was extorted by the FARC, which motivated Chiquita to pay the AUC…. [T]he new plaintiffs do not explain why Chiquita would want to have its own workers killed or why Chiquita was not equally prone to extortion from the ruthless and violent AUC, which was notorious for attacking those who resisted its demands… [I]n direct contravention of the facts recited in the plea agreement on which they rely [that Chiquita was “instructed” to make payments to the AUC and that “failure to make the payments could result in physical harm to Banadex personnel and property], plaintiffs ask the Court to accept as plausible their unsupported theory that Chiquita paid the AUC in exchange for the AUC’s violent “services” in “pacifying” the banana-growing regions.

Plaintiffs repeat the sensational, and entirely conclusory, allegations that Chiquita

engaged in weapons and drug trafficking. Here too, apart from misstatements or speculation, no facts are alleged to support the bald assertion that Chiquita—a U.S. public corporation that was thoroughly investigated by the U.S. Department of Justice for its extorted monetary payments to these armed groups—engaged in gun running and drug trafficking.

If the Supreme Court’s directives in Twombly and Iqbal mean anything, Federal Rule of Civil Procedure 8 requires more than a plaintiff’s say-so that a public company engaged in a side business of arms and narcotics smuggling, and that the U.S. Department of Justice chose to overlook it

Chiquita crystallized its legal arguments as follows:

• The theory of liability for “material support of terrorism” does not satisfy the Alien Tort Statute, as construed by the US Supreme Court in Sosa v. Alvarez-Machain, 542 U.S. 592 (2004), which requires clearly defined or universally recognized violations of international law.  Neither the International Convention for the Suppression of the Financing of Terrorism, 39 I.L.M. 270 (December 9, 1997) (“Financing Convention”) nor the hodgepodge of other sources on which plaintiffs rely establishes a universal and clearly defined norm sufficient to give rise to subject matter jurisdiction under Sosa.
• Trying this case would be intrusive and disruptive to the foreign relations of the United States, as this Court would be called upon to adjudicate plaintiffs’ assertions that the current president and the president-elect of the Republic of Colombia, a close ally of the United States, are complicit in mass murder. These are exactly the considerations the Supreme Court had in mind when it commanded the lower courts to exercise great  caution in recognizing new causes of action under the ATS.
• A violation of international law ordinarily requires state action, i.e., allegations establishing the direct participation of a government or public official in each of the particular killings or injuries alleged (relying on the appellate decision dismissing allegations against Coca-Cola, Sinaltrainal v. Coca-Cola Co., 578 F.3d 1252 (11th Cir. 2009)).
• The theory of “crimes against humanity” continues to be unrecognized as an actionable violation of international law, and in any event plaintiffs do not allege any facts tying the alleged killings to an “attack” on a civilian population.
• Claims that Chiquita was an “accessory” require that the accessory share the wrongful “purpose” of the primary violator.
• While they may have pled facts sufficient to trigger an inference that Chiquita made payments to the AUC knowing that the AUC would engage in violent conduct, the Complaints lack any facts giving rise to a plausible inference that Chiquita shared the murderous intent of the paramilitaries.
• Chiquita’s payments to both sides—coupled with plaintiffs’ ready admission that both of these notoriously violent, armed groups routinely extorted private business and that the AUC sought the “elimination of anyone . . . who opposed or complicated [its] control” — support the “obvious alternative explanation,” Iqbal, 129 S. Ct. at 1951, that Chiquita was extorted by both when they controlled the areas where Banadex operated.

Chiquita raises a number of other defenses, such as the statute of limitation and failure to plead necessary elements of state law causes of action, and argues the “prudential limitation on Article III standing non-resident aliens cannot sue in U.S. courts absent compelling circumstances.” (Emphasis mine.)

2.

 So, how do the allegations measure up against these arguments?  I excerpt here for the reader the core of the (unproven) allegations from the Henao Montes complaint (with some notations by me) that specifically allege not only material financial support, but crucial financial support, as well as weapons and narcotics shipments, and that Chiquita did these things to boost profits, control workers, and maintain operations.

C.        Chiquita Purposefully Aided And Abetted The AUC’s Use Of The Paramilitary Terrorism Tactics.

 355.     Until approximately 1997, leftist guerillas controlled the rural northern areas of Colombia, including the banana-growing regions in and around Santa Marta and Urabá.

356.     At all times relevant to the allegations in this Complaint, the Colombian security forces were unable to defeat the leftist guerillas operating in the banana-growing regions and were unable to protect landowners and businesses from guerilla attacks, kidnappings for ransom, massacres, murders, and extortion. The Colombian security forces effectively ceded control of the banana-growing regions to the FARC and the ELN.

357.     Without any opposition from Colombian security forces, leftist guerillas in the Santa Marta and Urabá banana-growing regions created an environment of violence, fear, and danger. Landowners and businesses were regularly subjected to kidnappings for ransom, murders, property damage, extortion, and war taxes. Banana workers and citizens in communities surrounding the banana farms were repeatedly subjected to murder, torture, and massacre by leftist guerillas.

358.     In or around 1982, Chiquita stopped banana operations in Colombia, in part because of the political turmoil and violence pervading the banana-growing regions.

Ed. Note: Plaintiffs argue that Chiquita would later face the choice of leaving, but stayed instead, and got involved in the violence.

359.     In 1989, Chiquita returned to Colombia and resumed banana operations in Santa Marta and Urabá. Upon returning, Chiquita formed Banadex to control all of its business operations in Colombia. By the mid-1990s, all of Chiquita’s Colombian subsidiaries were consolidated under the management of Banadex and its general manager.

360.     Chiquita purchased a large number of banana farms and became a large landowner with approximately 9,500 acres of farmland in the Santa Marta and Urabá banana-growing regions.

361.     Chiquita also steadily increased its workforce to support its expanding banana operations. By the mid-1990’s, it employed, through Banadex,  aapproximately 4,000 people in the banana-growing regions.

362.     At the time it resumed operations in Colombia, Chiquita knew that leftist guerillas controlled the banana-growing regions in and around Santa Marta and Urabá. Chiquita knew the leftist guerillas were hostile to its business interests. Chiquita knew the leftist guerillas would demand the payment of war taxes and that the leftist guerillas controlled the banana-growing regions through almost daily acts of violence, including murder, kidnapping for ransom, and extortion.

Ed. Note: The following allegations detail how Chiquita itself was savaged by the violence of the guerillas. Chiquita says these attacks demonstrate it had no choice but to pay extortion and was not aligned with the extortionists, while the Henao Montes plaintiffs allege Chiquita settled into a pact with the paramilitaries and that payments and other support were less “extortion” than they were some kind of necessary evil.

363.     At the time it resumed operations in Colombian, Chiquita knew that its executives, employees, and property would be subject to attack by leftist guerillas.

364.     Notwithstanding its knowledge, Chiquita first resumed, and then steadily expanded, banana operations in the leftist guerilla-controlled banana-growing regions in and around Santa Marta and Urabá. Chiquita knew it would be required to deal with the FARC and the ELN guerillas in the course of operating its business.

Ed. Note: These paragraphs are directed at Chiquita’s “mens rea” or criminal intent.

(1)        FARC And Other Leftist Guerillas Damaged Chiquita’s Banana Operations By Creating A Hostile And Dangerous Environment In Santa Marta and Urabá.

365.     Shortly after Chiquita resumed business operations in Santa Marta and Urabá, FARC and ELN guerillas began killing Chiquita’s banana workers and causing damage to its physical infrastructure.

366.     In and around the same period of time, the FARC began to extort Chiquita by demanding payments from the company. Chiquita executives understood that the FARC intended to kidnap its employees if the payments were not made.

367.     In order to continue doing business in the Colombian banana-growing regions, Chiquita began making regular payments to FARC and other leftist guerilla groups. At various times, Chiquita also made payments to the ELN. High-ranking officers in Chiquita’s world-wide headquarters were informed of, and approved, payments to the FARC and the ELN.

368.     Chiquita made regular payments to the FARC and the ELN from in or about 1989 through in or about 1997, when the FARC and the ELN controlled the Santa Marta and Urabá banana-growing regions.

Ed. Note: Both sides argue the significance of the extortion of Chiquita, with Chiquita claiming their choices were limited, while the Henao Montes plaintiffs contend Chiquita eventually retaliated against the guerillas in siding with the paramilitaries and, having little choice but to leave, cooperated actively with them.

369.     Notwithstanding regular payments, the FARC and the ELN guerillas continued to violently attack banana workers and infrastructure. The attacks significantly affected Chiquita’s operations in the Santa Marta and Urabá banana-growing regions.

370.     In 1990 or 1991, leftist guerillas kidnapped Chiquita’s security director in Colombia and held him for ransom. Chiquita was forced to negotiate for the director’s release.

371.     Between 1991 and 1997, leftist guerillas kidnapped and held for ransom at least three other Chiquita employees.

372.     In or about 1992, the ELN destroyed Chiquita’s wharf in the city of Turbo.

373.     During the four months between September and December 1993, leftist guerillas killed more than 220 banana workers in the Urabá region. Even though the area was experiencing high unemployment rates, the frequent slaughter of banana workers by the FARC and the ELN made it difficult for banana growers to find enough employees willing to work. According to press reports, the leftist guerilla-fueled violence resulted in a twenty percent reduction in the production and export of bananas from Urabá.

374.     During 1993, leftist guerillas forcibly shut down operations at a number of banana farms, preventing landowners and banana workers from cultivating the land. According to press reports, growers expected the leftist guerilla violence to reduce banana production for the year by up to twenty-five percent in comparison to the previous year.

375.     In 1995, leftist guerillas bombed a packing station owned and operated by Chiquita.

376.     On August 30, 1995, seventeen banana workers were massacred during a raid on a banana plantation by leftist guerrillas with automatic weapons. The guerillas lashed the banana workers hands behind their back, forced them to lay face-down on a muddy soccer field, then shot them in the head.

377.     On August 31, 1995, banana workers went on strike to demand protection from leftist guerillas. The strike shut down all banana operations in the Urabá region. At the time of the strike, Urabá accounted for 70% of all banana exports from Colombia.

378.     On September 20, 1995, leftist guerillas massacred twenty-six banana workers. Leftist guerillas made the workers lie down in a ditch beside the road and then shot them, point blank, in the back of the head. Leftist guerillas captured and shot the workers only a few minutes’ drive from a military base.

379.     The violence caused even more banana workers to flee Urabá. As a result, Chiquita and other banana producers continued to encounter difficulty finding enough employees. According to press reports, growers and producers in the area expected banana production to drop by twenty-five percent in comparison to the previous year.

380.     In 1996, leftist guerillas bombed another packing station owned and operated by Chiquita.

381.     In or around 1996 or 1997, leftist guerillas ambushed, shot, and wounded Chiquita’s Colombian Quality Control Director and his bodyguard while they were inspecting banana farms in a company car. The leftist guerillas spared the Quality Control Director’s life only after discovering that he was not the general manager of Banadex, who was their intended target and was reportedly Chiquita’s most senior employee in Colombia.

382.     In or around 1996 or 1997, leftist guerillas ambushed two cars carrying the general manager of Banadex and Chiquita executives who were traveling to a company farm in Santa Marta. The leftist guerillas opened fire on both cars with automatic weapons. Chiquita’s employees escaped unharmed and evaded capture only because they were inside bullet-proof vehicles.

(2)        Colombian Security Forces Were Incapable Of Defending Chiquita Against Leftist Guerilla Attacks.

383.     At all times relevant to the allegations in this Complaint, Colombian security forces were incapable of defending Chiquita, its executives, employees, and infrastructure, from attacks by FARC and ELN guerillas.

384.     Local and national law enforcement agencies were incapable of defending Chiquita against the FARC and the ELN guerillas. Local law enforcement agencies lacked the weapons, training, and personnel to successfully confront the leftist guerillas. In addition, the effectiveness of most local police agencies was degraded by rampant corruption. The national police force was equally ineffective at confronting leftist guerillas and incapable of defending Chiquita from attack.

385.     Colombia’s military could not defend Chiquita. In fact, the military was unable to defend itself from attack by leftist guerillas. Throughout the 1980’s and 1990’s, the FARC and the ELN regularly attacked military bases, killed soldiers, and stole weapons, munitions, and equipment.

386.     On several occasions, the Colombian Army demonstrated its inability to protect Chiquita from attack by leftist guerillas. For example, following the destruction of its wharf in Turbo, Chiquita asked the military for help. The military informed Chiquita that it could not respond promptly because it did not have flashlights and fuel.

387.     In late 1994, the military notified Chiquita that intelligence indicated that leftist guerillas intended to attack two Chiquita facilities. In a January 8, 1995 letter concerning the impending attacks, Brigadier General Alvarez Vargas of the Colombian Army informed the company that the military could not provide protection. Instead, General Alvarez recommended that the company “make a greater commitment to increase and improve [its] own security.”

(3)        Chiquita Agreed To Provide The AUC With Practical Assistance And Material Support To Pacify The Banana-Growing Regions.

388.     In late 1996 or early 1997, the Banadex general manager, and another Chiquita employee from Colombia, participated in a meeting of banana growers to discuss security issues arising from leftist guerilla activity in the Santa Marta and Urabá regions. The meeting was also attended by Carlos Castaño, the leader of the AUC. (“Castaño Meeting”).

389.     Chiquita’s employees recognized Castaño and were familiar with the AUC. Among other things, they knew the AUC was a participant in the War against the leftist guerillas. They also knew that the AUC used the Paramilitary Terrorism Tactics as part of its strategy for defeating the leftist guerillas and protecting landowners and businesses. From information widely reported in the Colombian media, Chiquita’s employees knew that the AUC’s tactics included, among other things, massacres, extra-judicial killings, forced disappearances, torture, and forced displacements.

Ed. Note: This is the “turning point,” in the Henao Montes allegations, when Chiquita first aligned with the AUC to provide Chiquita with security.

390.     During the Castaño Meeting, Castaño told Chiquita’s executives that the AUC had begun a sustained offensive to drive the leftist guerillas out of the Santa Marta and Urabá regions. Because of what they knew about Castaño and the AUC, Chiquita’s executives understood that the AUC intended to use the Paramilitary Terrorism Tactics.

391.     Castaño asked Chiquita to support the AUC in its War effort against the leftist guerillas in two ways. First, Castaño asked Chiquita to stop making payments to the leftist guerillas. Second, Castaño asked Chiquita to begin paying the AUC.

392.     Castaño informed Chiquita’s executives that the AUC would use money it received from Chiquita to finance Paramilitary Terrorism Tactics that would be used to drive the leftist guerillas out of the Santa Marta and Urabá banana-growing regions; protect the company, its executives, employees, and infrastructure from future attacks by leftist guerillas; and create a business and work environment that would enable Chiquita’s Colombian banana-growing operations to thrive.

393.     At the Castaño Meeting, and at all relevant times thereafter, Chiquita took sides with the AUC in the War against the leftist guerillas and helped to finance and assist the AUC’s efforts in that War.

394.     At the Castaño Meeting, and at all relevant times thereafter, Chiquita agreed, and acted with the intent, to aid and abet the AUC’s use of Paramilitary Terrorism Tactics to drive leftist guerillas out of, and maintain control over, the Santa Marta and Urabá banana-growing regions.

Ed. Note: The next few paragraphs state the crux of the complaint: Chiquita provides assistance and support to the AUC knowing it engages in “Paramilitary Terrorism Tactics” in order for Chiquita to be secure from the guerillas, this support substantially caused the AUC’s violence, and the support was criminal, not the acts of an innocent victim.

395.     Following the Castaño Meeting, Chiquita knowingly and intentionally provided practical assistance and material support to enable the AUC to use Paramilitary Terrorism Tactics for the purpose of (i) driving leftist guerillas out of the Santa Marta and Urabá banana regions; (ii) maintaining control over the banana-growing regions; and (iii) creating an environment where the company’s banana-growing operations could prosper.

396.     According to information developed by the Attorney General for the Republic of Colombia, the agreement between Chiquita and the AUC constituted a “criminal relationship” to bring about the “bloody pacification” of the banana-growing regions.

397.     The assistance provided by Chiquita had a substantial effect on the AUC’s ability to successfully employ the Paramilitary Terrorism Tactics in the two regions. Chiquita knew the AUC was using its assistance to employ the Paramilitary Terrorism Tactics.

(4)        Chiquita Purposefully Assisted The AUC When It Made More Than 100 Payments Totaling Over $1.7 Million Between 1996 And 2004.

398.     For more than seven years – from in or about 1996 through on or about February 4, 2004 – Chiquita, through Banadex, paid money to the AUC in Santa Marta and Urabá. Chiquita paid the AUC, directly or indirectly, nearly every month. From in or about 1996 through on or about February 4, 2004, Chiquita made over 100 payments to the AUC totaling over $1.7 million.

(i)         High-Ranking Company Officers And Directors Knew That The AUC Engaged In The Paramilitary Terrorism Tactics And Approved The Payments.

399.     Chiquita’s payments to the AUC were reviewed and approved by senior executives of the corporation, including high-ranking officers, directors, and employees. No later than in or about September 2000, Chiquita’s senior executives knew that the corporation was paying the AUC and that the AUC was a violent, paramilitary organization led by Carlos Castaño. An in-house attorney for Chiquita conducted an internal investigation into the payments and provided a high-ranking officer in the company with a memorandum detailing that investigation. The results of that internal investigation were discussed at a meeting of the Audit Committee of the Board of Directors in the company’s Cincinnati headquarters in or about September 2000.

Ed. Note: To paraphrase the Watergate mantra, “What did Chiquita executives know and when did they know it?”  It is alleged they learned through an in-house attorney’s investigation and report. In the compliance world, this is a big “red flag.”

400.     For several years, from in or about 1996 until April 2002, Chiquita paid the AUC by check through various convivir in both the Santa Marta and Urabá regions. The checks were nearly always made out to the convivir and were drawn from Banadex’s bank accounts. Chiquita recorded these payments in its corporate books and records as “security payments” or payments for “security” or “security services.”

401.     In or about April 2002, Chiquita seated a new Board of Directors and Audit Committee following its emergence from bankruptcy.

402.     On or about April 23, 2002, at a meeting of the Audit Committee of the Board of Directors in Chiquita’s Cincinnati headquarters, the Audit Committee adopted new procedures for secretly paying the AUC. Pursuant to the new procedures, Chiquita’s executives in Colombia would issue checks payable to an individual employee who would endorse the checks. After converting the check to cash, another Chiquita employee in Colombia was assigned to deliver the funds, in cash, to the AUC.

Ed. Note: The allegation that the Audit Committee knew of, and directed the means for, secret payments is something Chiquita argues was necessary and plaintiffs argue shows a guilty mind.

403.     Beginning in or about June 2002, Chiquita began paying the AUC in the Santa Marta region of Colombia directly, secretly, and in cash according to new procedures established by Chiquita’s senior executives. The Chiquita employee to whom the AUC checks were made payable maintained a private ledger of the payments that did not reflect that the AUC was the ultimate and intended recipient of the payments.

(ii)        Chiquita Continued To Assist The AUC Even After The United States Government Designation Made The Payments A Felony.

404.     The United States government designated the AUC as an FTO on September 10, 2001. That designation was well publicized in the American public media. The AUC’s designation was first reported in the national press by the Wall Street Journal and New York Times, among others, on September 11, 2001. It was later reported in the local press in Cincinnati, Ohio where Chiquita’s headquarters were located. The Cincinnati Post reported the AUC’s FTO designation on October 6, 2001, and the Cincinnati Enquirer reported the designation on October 17, 2001. The AUC’s designation was even more widely reported in public media in Colombia.

Ed. Note: To defeat Chiquita’s innocent victim defense, the Henao Montes plaintiffs argue that Chiquita disregarded published information it could not have missed, as Chiquita argues, that it was now actively funding a banned terrorist organization, thus elevating the seriousness of the actions. This occurred the day before the 9/11 attacks, at a time when attention to terrorist support was at an all-time high.

405.     Chiquita had information about the AUC’S designation as an FTO specifically and global security threats generally through an Internet-based, password-protected subscription service that it paid money to receive. On or about September 30, 2002, a Chiquita employee, from a computer within Chiquita’s Cincinnati headquarters, accessed the service’s “Colombia-Update page,” which contained the following reporting on the AUC. “US terrorist designation International condemnation of AUC human rights abuses culminated in 2001 with the US State Department’s decision to include the paramilitaries in its annual list of foreign terrorist organizations. This designation permits the US authorities to implement a range of measures against the AUC, including denying AUC members US entry visas; freezing AUC bank accounts in the US; and barring US companies from contact with the personnel accused of AUC connections.”

406.     Even after learning that the United States government had formally designated the AUC as an FTO, Chiquita continued to make payments to the AUC in the Santa Marta and Urabá regions of Colombia without applying for a required government license. From on or about September 10, 2001, through on or about February 4, 2004, Chiquita made 50 payments to the AUC totaling over $825,000.

(iii)       Chiquita Continued To Assist The AUC Against The Advice Of Its Outside Counsel In The United States.

407.     On or about February 20, 2003, high-ranking officers and employees of Chiquita spoke with attorneys in the District of Columbia office of a national law firm (“outside counsel”) about the United States government’s designation of the AUC as an FTO and Chiquita’s ongoing payments to the AUC.

Ed. Note: The following allegations of acting against attorney advice go to Chiquita’s criminal intent.

408.     Beginning on or about February 21, 2003, outside counsel advised Chiquita that the payments were illegal under United States law and that Chiquita should immediately stop paying the AUC directly or indirectly. Among other things, outside counsel, in words and in substance, advised Chiquita:

· “Must stop payments.” (notes, dated February 21, 2003)

· “Bottom Line: CANNOT MAKE THE PAYMENT” “Advised NOT TO MAKE ALTERNATIVE PAYMENT through CONVIVIR” “General rule: Cannot do indirectly what you cannot do directly” “Concluded with: CANNOT MAKE THE PAYMENT” (memo, dated February 26, 2003)

· “You voluntarily put yourself in this position. Duress defense can wear out through repetition. Buz [business] decision to stay in harm’s way. Chiquita should leave Columbia.” (notes, dated March 10, 2003)

· “[T]he company should not continue to make the Santa Marta payments, given the AUC’s designation as a foreign terrorist organization[.]” (memo, dated March 11, 2003)

· “[T]he company should not make the payment.” (memo, dated March 27, 2003)

409.     Chiquita ignored the legal advice of its outside counsel and continued to make unlawful payments to the AUC. In February and March 2003, Chiquita made cash payments to the AUC totaling $36,871.

410.     On or about April 3, 2003, a member of the board of directors and a high-ranking officer reported to the full board of directors that Chiquita was making payments to a designated FTO. The board agreed to disclose the payments to the DOJ.

Ed. Note: When can/should extortion victims report the crime to local or US government officials?  Here, the Henao Montes plaintiffs allege that Chiquita ignored what DOJ officials said, but the Special Committee report concluded that DOJ was statements were reasonably misunderstood by company officials.

411.     On or about April 4, 2003, according to the notes of Chiquita’s outside counsel concerning a discussion about the AUC payments, high-ranking Chiquita executives were of the opinion to “just let them sue us, come after us.”

412.     On or about April 8, 2003, high-ranking Chiquita executives instructed the company to continue making make payments to the AUC.

413.     On or about April 24, 2003, a director and high-ranking officer of Chiquita, together with Chiquita’s outside counsel, met with DOJ officials. The DOJ officials told Chiquita that the company’s payments to the AUC were illegal and could not continue.

414.     However, Chiquita continued to make payments to the AUC. Between May 12, 2003 and September 1, 2003, Chiquita made nine cash payments totaling approximately $140,866.

415.     On or about September 8, 2003, Chiquita’s outside counsel advised Chiquita in writing that DOJ officials had repeatedly stated that they could not condone current or future payments to the AUC.

416.     Despite this warning, Chiquita continued to make payments to the AUC. Between September 8, 2003 and December 16, 2003, Chiquita made six cash payments totaling approximately $126,250.

417.     On or about December 22, 2003, a member of Chiquita’s board of directors warned other board members in an email that the company appeared to be “committing a felony” by continuing to make the AUC payments.

418.     Despite this warning, Chiquita continued to make payments to the AUC. Between December 22, 2003 and February 4, 2004, Chiquita made three more cash payments to the AUC totaling approximately $43,023.

419.     On March 13, 2007, the United States filed a criminal information against Chiquita in the United States District Court for the District of Columbia.

420.     On or about March 19, 2007, Chiquita pleaded guilty to one count of Engaging in Transactions with a Specially-Designated Global Terrorist, in violation of 50 U.S.C. § 1705(b) and 31 C.F.R 594.204. In conformity with its plea agreement, Chiquita agreed to a criminal fine of $25 million and was placed on corporate probation for a period of five years.

Ed. Note: The next few paragraphs relate Chiquita’s financial assistance to the violent acts of the AUC.

421.     The financial assistance Chiquita provided to the AUC had a substantial effect on the AUC’s ability to carry out its plan to drive leftist guerillas out of the Santa Marta and Urabá banana-growing regions and its ability to maintain control after regaining the regions from the leftist guerillas.

422.     According to Jose Gregorio Mangones Lugo (“Mangones”), an AUC leader of the William Rivas Front in the Santa Marta banana region, the income the AUC received from Chiquita was essential to its operations in the area. In a normal month, eighty to ninety percent of the income for the William Rivas Front came from banana companies, including Chiquita. The William Rivas Front used the funds it received from Chiquita to pay salaries for paramilitary soldiers, purchase weapons and supplies for the soldiers, and to provide transportation for its operations. Without the payments from Chiquita, the AUC’s William Rivas Front could not have prosecuted the War and used the Paramilitary Terrorism Tactics.

423.     According to Mangones, during the period of time Chiquita made payments to the AUC, the AUC killed many civilians in the Santa Marta region as part of what the AUC “had to do in order to win” the War against the leftist guerillas. Among those killed by the AUC were some individuals targeted for assassination by Chiquita executives in Colombia.

424.     Chiquita made the payments to the AUC for the purpose of facilitating the AUC’s ability to combat the leftist guerillas and employ the Paramilitary Terrorism Tactics for which it had become notorious, including massacres, extra-judicial killings, forced disappearances, torture, and forced displacements of civilians accused of being leftist guerillas and their sympathizers or supporters.

425.     As a result of the funding it received from Chiquita, the AUC had the resources needed to carry out the War against leftist guerillas, their sympathizers, and supporters and to maintain control over the banana-growing regions.

426.     As a result of the funding it received from Chiquita, the AUC killed, injured, or forcibly disappeared the individuals identified in Paragraphs 9 to 252 of this Complaint using Paramilitary Terrorism Tactics.

Ed. Note: The following allegations are the explosive ones (no pun intended – this is serious stuff). Nicaraguan arms offloaded through Chiquita facilities with its knowledge would, if true, seriously change the character of the case. But wasn’t this information known to the US government when it prosecuted Chiquita? Why did it not come out?

(5)        Chiquita Purposefully Assisted The AUC When It Facilitated The Shipment Of Arms And Ammunition Through Its Turbo Port Facilities.

427.     Chiquita facilitated the AUC’s use of Paramilitary Terrorism Tactics by making its seaport facilities in the city of Turbo available to the AUC for illegal arms shipments. Chiquita purposefully made its seaport available in order to assist the AUC in driving leftist guerillas out of the Santa Marta and Urabá banana-growing regions and maintaining control over the regions so the company’s banana-growing operations could prosper.

428.     In 2001, the Nicaraguan National Police made arrangements to exchange 3,000 AK-47 assault rifles and 5 million rounds of ammunition for weapons more suited to police work. The Nicaraguan National Police employed a private Guatemalan arms dealer to handle the exchange. The arms dealer, in turn, arranged to sell the AK-47 assault rifles and ammunition for $575,000 to an arms merchant based in Panama acting on behalf of the AUC.

429.     In November 2001, a vessel named the “Otterloo” left Nicaragua with Panama as its declared destination carrying the assault rifles and ammunition. Instead of sailing to Panama, the Otterloo traveled to Turbo, Colombia.

430.     Bills of lading, shipping invoices, and other documents identified Chiquita as the intended recipient of the arms and ammunition shipment.

431.     The arms and ammunition were off-loaded at sea from the Otterloo onto Chiquita’s barges by Chiquita’s employees and brought to Chiquita’s private warehouse facility where they were stored for a period of time. Chiquita employees and/or agents supervised a fictitious inspection of the shipping containers and arranged to load the weapons and ammunition onto trucks for delivery to the AUC.

Ed. Note: How valid are the arm’s allegations? They are attributed some weight by the General Secretariat of the OAS. But the allegations “upon information and belief” are really conclusions or inferences drawn by plaintiffs counsel, not facts they believe they already can prove.  What is the evidentiary probity of an interview with Carlos Castano, the notorious head of the AUC?

432.     A formal report by a General Secretariat of the Organization of American States concluded that the transfer of arms and ammunition to AUC could not have occurred without accomplices in Turbo.

433.     Plaintiffs are informed and believe that Chiquita facilitated at least four more arms and ammunition shipments through its Turbo port facilities. According to an interview with the Colombian newspaper El Tiempo, Castaño boasted in response to a question about the Otterloo incident, “This is the greatest achievement by the AUC so far. Through Central America, five shipments, 13 thousand rifles.”

434.     Chiquita was aware that it had substantially assisted the AUC’s use of Paramilitary Terrorism Tactics by helping them acquire a large number of military-grade assault rifles together with a large quantity of ammunition for those rifles. The arms had a substantial effect on the AUC’s ability to carry out its strategy to drive leftist guerillas out of the Santa Marta and Urabá banana-growing regions and to, thereafter, maintain control over the regions through the use of Paramilitary Terrorism Tactics.

435.     As a result of obtaining weapons with assistance from Chiquita, the AUC had the resources needed to carry out the War against leftist guerillas, their sympathizers, and supporters and to maintain control over the banana-growing regions.

436.     As a further result of obtaining weapons with assistance from Chiquita, the AUC killed, injured, or forcibly disappeared the individuals identified in Paragraphs 9 to 252 of this Complaint using Paramilitary Terrorism Tactics.

Ed. Note: The introduction of narcotics into the mix also changes the character of the case against Chiquita, like allegations of weapons shipments. The same skeptical questions must be asked, however.

And, in both cases, we will be watching to see whether the same Chiquita executives that felt it necessary to make the payments were advised of and permitted the additional cooperation on guns and drugs, and if so, how they will argue their innocence in the kidnappings and murders that followed.

(6)        Chiquita Purposefully Assisted The AUC When It Facilitated The Shipment Of Narcotics Through Its Turbo Port Facilities.

437.     Chiquita also purposefully assisted the AUC by allowing it to use the company’s private seaport facilities to smuggle large quantities of illegal drugs, especially cocaine, out of Colombia.

438.     According to Colombian prosecutors, the AUC shipped drugs on Chiquita’s boats carrying bananas to Europe. AUC leaders have stated that the AUC tied drugs to the hulls of banana ships at high sea to evade security agencies’ control points. On seven different occasions, the Colombian government seized cocaine hidden in banana shipments on Chiquita’s boats. More than one and one-half tons of cocaine has been found hidden in the company’s produce, valued at over $33 million dollars. Two of the ships on which drugs were found were named the Chiquita Bremen and the Chiquita Belgie.

439.     Upon information and belief, drug shipments could not have been attached to Chiquita’s banana boats, or hidden in the cargo, without the active collusion or willful ignorance of Chiquita employees.

440.     Chiquita knew the AUC obtained large sums of money from its illegal drug trafficking activities. Chiquita also knew the AUC used the money it obtained from drug trafficking activities to finance its participation in the War, including its use of the Paramilitary Terrorism Tactics. Chiquita purposefully allowed the AUC to use its banana boats and ships to help the AUC acquire money that could be used to support and facilitate its effort to drive leftist guerillas out of the Santa Marta and Urabá banana-growing regions and to, thereafter, maintain control over the regions using the Paramilitary Terrorism Tactics.

441.     By providing the AUC with access to its private port at Turbo and to freighters that are owned, operated, or controlled by the company, Chiquita had a substantial effect on the AUC’s ability to carry out its plan to drive leftist guerillas out of the Santa Marta and Urabá banana-growing regions and to maintain control over the regions.

442.     As a result of the funding it derived from drug trafficking activities carried out with assistance from Chiquita, the AUC had the resources needed to carry out the War against leftist guerillas, their sympathizers, and supporters and to maintain control over the banana-growing regions.

443.     As a further result of the funding it derived from drug trafficking activities carried out with assistance from Chiquita, the AUC killed, injured, or forcibly disappeared the individuals identified in Paragraphs 9 to 252 of this Complaint using Paramilitary Terrorism Tactics.

D.        Chiquita Took Sides With The AUC For The Benefits It Would Receive From The Defeat And Expulsion Of Leftist Guerillas, Sympathizers, And Supporters In The Banana-growing Regions.

444.     As a result of purposefully providing assistance and material support to the AUC, Chiquita received significant benefits arising from the AUC’s use of the Paramilitary Terrorism Tactics to drive the leftist guerillas, and their sympathizers and supporters, out of the Santa Marta and Urabá banana-growing regions. Chiquita received additional benefits when the AUC used the Paramilitary Terrorism Tactics to maintain control over the banana-growing regions.

445.     Because the AUC succeeded in driving the leftist guerillas out of the banana-growing regions, Chiquita executives in Colombia were no longer in constant danger of being kidnapped and held for ransom. Chiquita’s executives were no longer subject to great risk of being shot and killed by leftist guerillas. The AUC also protected Chiquita’s banana workers from attacks by leftist guerillas.

446.     The AUC used Paramilitary Terrorism Tactics to ensure that local people living in the banana-growing regions would never again entertain the idea of supporting or joining the leftist guerillas.

447.     The AUC guarded Chiquita’s farms and infrastructure to protect them from being bombed, burned or destroyed by leftist guerillas. The AUC stopped common criminals from hijacking banana shipments, looting company storage facilities, or damaging company infrastructure. The AUC also provided armed escorts to accompany major bananas shipments from the farm to storage facilities and then from storage facilities to the port for shipping.

448.     Chiquita also used the AUC to resolve complaints and problems with banana workers and labor unions. Among other things, when individual banana workers became “security problems,” Chiquita notified the AUC, which responded to the company’s instructions by executing the individual. According to AUC leaders, a large number of people were executed on Chiquita’s instructions in the Santa Marta region.

449.     The AUC also helped Chiquita by “pacifying” the labor union that represented banana workers in the region by assassinating its leftist president and installing a new union leader that would represent both the workers and Chiquita. Following the assassination, the AUC continued to oversee the labor unions on Chiquita’s behalf to ensure that union members did not attempt to take advantage of the company.

450.     Throughout the period of time it made payments to the AUC, Chiquita and the AUC communicated regularly to identify problems and resolve problems.

451.     As the AUC took and maintained control over the banana-growing regions, land prices improved and became stable, benefiting large landowners like Chiquita.

452.     By 2003, Chiquita’s operations in the Santa Marta and Urabá regions were the company’s most profitable banana-producing operation anywhere in the world.

Increasingly, the crux of the Chiquita Brands case may be more than just admitted payments totaling US$1.7M to the paramilitary AUC from 1997-2004, but additional forms of support, including weapons shipments.

In testimony before the U.S. Senate Judiciary Committee, Subcommittee on Crime and Drugs, Lee Wolosky, a former National Security Council official and now lead counsel to many plaintiffs in the cases against Chiquita, addressed how private litigation can supplement anti-terrorist enforcement actions. The Subcommittee is considering The Justice Against Sponsors of Terrorism Act, S. 2930.

At the same time that Wolosky is arguing for this new legislation, he is arguing that there is sufficient legal basis to hold providers of material support for terrorist acts liable for damages.

Wolosky testified that:

The Chiquita case provides another example of how civil litigation may complement U.S. government enforcement actions in deterring financial transactions involving foreign terrorist organizations.

Chiquita has admitted to providing the United Self-Defense Forces of Colombia (AUC) – which the State Department designated a foreign terrorist organization in 2001 – with a total of $1.7 million from 1997 to 2004. Chiquita is also alleged to have facilitated arms shipments to AUC, including the shipment of thousands of assault rifles and millions of rounds of ammunition.

The AUC has been responsible for some of the worst atrocities in Colombia`s ongoing civil conflict and participates heavily in the cocaine trafficking industry. According to the State Department, during the period of Chiquita`s support payments “the AUC engaged in terrorist activity through a variety of activities including political killings and kidnappings of human rights workers, journalists, teachers, and trade unionists, among others.“

Chiquita also admitted to providing money to the Revolutionary Armed Forces of Colombia (FARC), which, like AUC, is on the State Department`s list of foreign terrorist organizations. In 2007, Chiquita pleaded guilty to engaging in transactions with a specially-designated global terrorist and agreed to pay $25 million in fines. That year, Chiquita had annual revenues of $4.5 billion.

Soon after the guilty plea, families of over two hundred Colombian victims killed by the AUC filed a purported class action lawsuit against Chiquita in federal court. Five other suits have been filed against Chiquita on behalf of U.S. citizens and Colombian plaintiffs. These suits (which rely principally on the Anti-Terrorism Act and the Alien Torts Statute) demonstrate the deterrent role that civil litigation can play against support for terrorism: Chiquita faces potentially significant civil damages as a result of the litigation – far in excess of the $25 million it agreed to pay as the result of U.S. government enforcement actions.

Corporations, self-avowed charitable organizations, and other large entities will continue to provide material support for terrorist organizations until it is financially unpalatable for them to do so. Although government sanctions are clearly an integral part of the effort to stem the flow of funds to terrorist groups, civil litigation can substantially enhance the financial consequences that such entities face. This proposed bill will make it easier for litigants to sue those who provide support to terrorists who kill or injure Americans. It will thereby deter future such support.  (Transcript courtesy of Roll Call, available at 2010 WLNR 14105662, Copyright 2010 by Roll Call, Inc. )

Wolosky, according to his firm’s website, has offered testimony on terrorism financing on several occasions.  Indeed, the legislation he is supporting is intended to make such cases as the one he has brought against Chiquita easier to prove and win. The deterrent angle that he argues in this testimony is undeniable. Any organization that is weighing a response to extortion threats for payments must be carefully evaluating whether it will face criminal fines and sanctions, and much larger potential damages awards under legal standards that are more easily satisfied than the high burden of proof for criminal conviction.

That is not, however, to presume the truth of the allegations Wolosky makes about Chiquita.  Cases against Coca-Cola and Drummond involving payments to the FARC were dismissed by the courts, but those were lacking in detailed evidence of a direct nexus to acts of murder and kidnapping. 

The statement that “Chiquita is also alleged to have facilitated arms shipments to AUC, including the shipment of thousands of assault rifles and millions of rounds of ammunition,” must have something to stand behind it, but that allegation has not been tested or proven yet, and it would seem crucial to the case against Chiquita.  Such proof was not found, however, when the Chiquita Brands Board’s Special Committee conducted its investigation, including when Special Committee counsel asked plaintiffs’ counsel to produce proof of these allegations.

Is that kind of evidence now available?  In my next installment, a review of the detailed allegations in the complaint that Wolosky filed.

An outcry has erupted in recent days over former Colombian hostage (and former presidential candidate) Ingrid Betancourt. Almost eight years ago, Betancourt defiantly drove through dangerous territory in Southern Colombia, apparently against the advice of security forces, to meet with FARC rebel forces and try to break an impasse in peace negotiations. Instead, she was herself taken hostage and held for over six years. She was rescued in a daring raid by government troops that made headlines around the world. Last week, however, she started legal proceedings against the Colombian government claiming US$6 million in damages.  A new word was coined describing the public outcry at her actions: “Ingrititude.”  She was forced to withdraw the claim and to announce that she only holds the FARC forces responsible for her capture and suffering and, inexplicably, does not intend to claim damages for herself.

Is there really no one else responsible beside the FARC? Who provided the FARC terrorists with material assistance? These questions are being addressed as former hostages (and survivors of other victims) have sued for damages in some cases – not against the Colombian government but against private companies like Coca-Cola, Drummond Coal, and Chiquita Brands.  As I reviewed in Part Two of this series, however, the cases against Coca-Cola and Drummond Coal were dismissed.  A recent court decision, however, sustained – as a provisional matter and subject to evidence — lawsuits which allege that Chiquita provided extensive material support – not just extorted monies but covert arms transport – in a campaign designed to destroy banana unions and keep Chiquita in business in Colombia.

A review of the various allegations is very timely this week as the world considers: who is responsible in damages for murders and kidnappings carried out by the guerillas and paramilitaries in Colombia before they were beaten back by government forces?

1.

In the 1990’s and into this decade, Chiquita Brands’ Colombian subsidiary, Banadex, operated over 200 farms and controlled significant amounts of land area in two very challenging parts of Colombia: the Urabá region adjacent to the Panama border, and the Santa Marta region in Northeast Colombia adjacent to Venezuela. Both were dominated by warring factions. Initially, it was the communist guerillas of the FARC and ELN, but they were displaced by the paramilitary forces of the AUC. The paramilitaries, over time, operated very closely with government forces and the military, and there were in fact decrees and other laws specifically coordinating government action with the paramilitaries during the very late 90’s and into the early 2000’s.  Like the guerillas before them, the paramilitaries exacted security payments from landowners like Chiquita – i.e., extortion.

But how far did Chiquita go in making these payments and cooperating with the guerillas and then the paramilitaries? New cases allege that the Chiquita payments were made to de facto governments in those areas, and therefore were not just actions complicit in numerous deaths, but corrupt payments to foreign government officials. These allegations, still untested, follow a court ruling earlier this year finding a complaint against Chiquita legally sufficient on its face – though still unproven – to state valid claims of violations of the Anti-Terrorism Act.

What did Chiquita do?

The answer depends upon whom you ask.  In this article I present information from Chiquita’s own special investigation and from the unproven allegations of families of several murder victims as evaluated by a federal judge for legal sufficiency in a recent decision. A third source of information was covered in Part One — Chiquita’ guilty plea to a single transaction with a Specially Designated Global Terrorist Organization.

2.

In this section, I review the findings made by a special investigation launched after Chiquita Brands, the US-based parent company, was hit with shareholder lawsuits alleging that senior officials of the company breached fiduciary duty wasted corporate assets in connection with illegal conduct in its Colombia operations. Independent members of Chiquita’s board of directors constituted a special litigation committee (the “Special Committee”) to investigate the facts, and hired a large New York international law firm. The committee issued a 269-page report (the “Special Report”) detailing that Chiquita paid monies under extortion threats, out of concern for the safety of its workers, and recommended that the company seek to dismiss the lawsuit against it by the shareholders.  The Special Committee concluded that the officers and directors of Chiquita made fair business judgments and were not liable to the shareholders. In January, Chiquita settled shareholder derivative actions relating to payments by adopting corporate governance and compliance changes and paying attorneys fees.

The Special Committee’s report provides extensive detailed findings that Banadex made payments, first to the FARC and ELN guerillas, and then to the paramilitaries. The payments were arranged in person in some cases, and were actively concealed throughout. Colombian lawyers opined that extortion payments were not illegal payments.

Many would view the Special Committee as biased in favor of Chiquita, and, the burden for shareholder liability is very different from the burden for tort liability. Indeed, the Special Report lists several determinative factors for its decision to seek dismissal of the claims against Chiquita, including the expense to the company of continued litigation, reputational harm, and diversion of management time and resources. Also included was the Special Committee’s finding that none of the company directors and officers involved acted in any bad faith.

Nevertheless, the Special Committee investigation was quite thorough, and included seeking the information of the plaintiffs’ counsel. The Special Report, in a footnote, discounted that Chiquita had any role in any arms shipments, saying:

The Special Committee found evidence of only three specific incidents of smuggling, all of them by third parties. The Special Committee found no evidence that any Chiquita employees committee wrongdoing in connection with these incidents or that any member of senior Banadex of Chiquita management had prior knowledge of or involvement in them. The evidence shows that, in each instance, the event was reported internally, appropriately investigated, and any necessary remedial steps were taken. Despite requests made by the Special Committee to all lead counsel in the [Anti-Terrorism Act/Alien Tort Statute] cases for any evidence supporting claims that Chiquita was involved in drugs and arms smuggling, no such evidence was provided.

The report also indicated that the Special Committee had the full cooperation of the Company and its personnel (none of whom were charged by the Department of Justice with any crimes), which the DOJ obviously did not have, and had full access to the company’s investigation relating to the DOJ charges, and reviewed reams and reams of documents.

Special Committee counsel met periodically during its investigation with lead plaintiffs’ counsel to brief them on the facts adduced and the procedures being followed, and received no objection.  Special Committee counsel were informed by lead plaintiff’s counsel that their allegations were based upon publicly available information – they otherwise had no documentation of any of their claims. This looms as a major factor.

Significantly, there was no evidence found of any actual nexus between Chiquita payments or activities and specific acts of murder or kidnapping. And, the report cites Colombian lawyers’ opinions that extortion payments are not illegal payments, and that payments to a duly-authorized and -constituted “convivir” organization were not illegal. The report finds instead that all individuals, even those who made recognized errors, acted in good faith out of concern for harm to Banadex personnel under extortion. This perspective gave no express consideration to the possibility, central to the argument seen later in the New Times Missionaries case, that Banadex directly benefited by AUC payments that harassed and limited the banana worker unions. There is also no apparent consideration of why Chiquita did not earlier report the extortion payments to the authorities and seek legal protection, whether in the United States or Colombia. On the contrary, as recognized in the New Times Missionaries case, a Chiquita executive stated that, but for Chiquita’s informing the U.S. Department of Justice in 2003, the facts would likely never have come to light.

According to the Special Committee report, Chiquita made payments to both the communist FARC/ELN and the right-wing paramilitaries, at different times falling into three periods from 1989 through 2004. During the first time period, from 1989 though at least 1997, Chiquita made payments to the FARC and the ELN (Ejercito de Liberación Nacional, or National Liberation Army). The FARC was designated a Foreign Terrorist Organization by the United States in 1997, and was long known before that to be a violent terrorist organization.

In the second phase, from roughly 1997 to September 10, 2001, Chiquita shifted its payments to the AUC or Autodefensas Unidas de Colombia, the United Self-Defense Forces of Colombia, also known as the paramilitaries. Paramilitary forces first emerged as Antioquia landowners fought the guerilla insurgencies seeking the violent overthrow of the Colombian government, particularly where the national army and police were feckless. Over time they consolidated into the AUC, and their conduct resulted, on the day before 9/11, in the U.S. Government naming the AUC a Foreign Terrorist Organization and a Specially-Designated Global Terrorist. Payments were also made during this phase to an organization called “convivir” (meaning “live together”) closely associated with the paramilitaries.

In the third and most difficult phase, Banadex’s paramilitary payments continued after and despite the September 10, 2001 determination by the United States Government that the AUC was a “Foreign Terrorist Organization.” This determination meant that any payments to the AUC were strictly prohibited. Chiquita executives failed to discover this terrorist designation for over eighteen months, having missed news reports to that effect and despite the events of 9/11 that clearly raised the level of international concern about terrorist organizations. Chiquita nevertheless continued to make the prohibited payments — out of concern for its workers’ safety, the Special Report found – until late 2004. No payments have been made since, and the subsidiary was later sold off.

Chiquita reportedly had a “robust” (according to the Special Committee) FCPA compliance program. It stemmed from the fact that Chiquita’s predecessor, United Fruit, engaged in conduct in Hondura that was a principal reason for passage of the FCPA and resulted in a consent decree requiring the company to institute rigorous compliance procedures relating to payments to or for the benefit of foreign officials.  The program reportedly captured information about most of the improper payments, and Chiquita obtained and relied upon Colombian legal opinions that determined (without question) that the payments were extorted, that is, obtained by force and under duress, and therefore not illegal under Colombian law.

Nevertheless, Chiquita failed to learn about and report to the correct authorities in upper management all of the payments. Moreover, certain aspects of the payments were not reflected properly in company books and records. For example, the paramilitaries summoned a Chiquita official to a meeting at which threats were made if the payments were not forthcoming; this meeting was not documented or reported in the company. Also, the Special Committee was (justifiably) critical of the audit committee and general counsel’s failure to learn timely about the foreign terrorist organization designation and to make sure that Banadex did not violate the law against payments to a foreign terrorist organization. (However critical, the Special Committee’s response seems more muted that it would have been if the violations of the Anti-Terrorist Act concerned an organization like Al Qaeda instead of the FARC or AUC, but that is pure speculation.)

Chiquita has had other problems in Colombia. In 2001, Chiquita was charged with paying bribes to a port officials through a customs broker to renew rights to use port facilities. Chiquita admitted the payments, which also weren’t caught in its books and records, and which were made without the knowledge or consent of any employee at the parent level and in apparent contravention of Chiquita’s policies. The initial payment was recorded as a maritime donation on the Company’s books and the second installment was identified as relating to a maritime agreement. Chiquita’s internal audit subsequently discovered the payments, and the relevant employees were terminated. Chiquita paid a $100,000 fine and agreed to a cease-and-desist order. (SEC v. Chiquita Brands Int’l, Inc., Accounting and Auditing Enforcement Rel. No. 1,464 (Oct. 3, 2001).  Read more about this case from Transparency.org and from Goliath.) It stands generally for the proposition that where the DOJ brings criminal charges against a foreign, wholly-owned subsidiary, the Issuer parent is typically held civilly accountable for the failure of the subsidiary to maintain accurate books and records and for its own lack of internal controls that should have prevented and caught the FCPA violations, even if the Issuer had no knowledge of the conduct.

The Special Committee does concede a number of errors by its directors. Its general counsel failed to notice for over eighteen months that the party it was paying extortion had been added to a federal list of persons with whom it is a crime to engage in transactions because they are terrorists. This occurred a day before the events of 9/11. Similarly, he delayed in telling the audit committee for five weeks, waiting for a regularly scheduled meeting, about the terrorist designation. The general counsel failed to stop two payments to the “convivir” because he forgot about them. And he did not tell the audit committee the payments were going to continue despite the terrorist designation because the Special Committee believed, after dozens of hours of interviews, he was truly concerned that failure to pay would result in injury, kidnapping, or death. The Special Committee had similar concerns about the conduct of an independent director (and former SEC Chairman) who took over management of the issue after the terrorist designation was discovered.  But the Special Committee’s concerns did not include any of the decisions to make the payments themselves.

3.

The complaint filed by survivors of several members of the New Tribes Missionaries who were kidnapped and murdered makes allegations that are unproven — that makes them unreliable. In fact, the Special Report states that the plaintiffs’ attorneys were asked to provide information relating (among other things) to alleged drug and weapons smuggling, and none was forthcoming.  To put it mildly, the case has not been tested.  No witnesses have sworn their testimony under oath, no one has been cross-examined, and hearsay and other non-evidence has not been ferreted out.  The Special Committee reported, moreover, that the plaintiffs counsel they consulted had no evidence that was not publicly-available.

However, with detailed factual allegations and a court’s determination that, if true, the allegations are sufficient to require Chiquita to pay damages, the New Tribes Missionaries case is important to study.  It deals only with FARC payments (not the later AUC payments), and is similar to the claims made by former hostage Stansell and his Northrup Grumman co-workers and their families. Chiquita is facing similar lawsuits from over 200 plaintiffs injured by terrorist acts caused by the right-wing paramilitaries.

Under the Anti-Terrorism Act, a federal district court judge granted an order finding that, if the as-yet-unproven allegations are true, they would suffice to make Chiquita liable for the FARC’s murders of the missionaries. The same judge is hearing all the consolidated cases involving Chiquita.

The survivors of the five New Times Missionaries allege that the five were killed (in separate incidents in 1993 and 1994 through acts of international terrorism by the FARC, and that Chiquita aided and abetted the FARC, conspired with the FARC, and provided material support to the FARC.

Chiquita is a multinational corporation incorporated in New Jersey and headquartered in Cincinnati, Ohio. One of the largest banana companies on the planet, it operated through its wholly-owned subsidiary, C.I. Bananos de Exportacion, S.A. (“Banadex”) until approximately May 2004. Banadex had over 2000 farms. The complaint alleges that Banadex was Chiquita’s controlled subsidiary, agent, and/or alter ego.

Chiquita’s payments to FARC, which began as cash at FARC’s request, escalated into regular monthly payments ranging from $20,000.00 to $100,000.00. Over time, the payments were fixed to a percentage of Banadex’s gross revenues, with as much as ten percent being diverted to FARC.”

Chiquita went to great lengths to mask payments to the FARC (made from 1989-1997), by delivering them first in cash by a senior employee who is a former American military pilot, then later by padding the payroll with fake names through front organizations, and also by working with labor unions controlled or co-opted by the FARC, including the Sintrabanano banana workers union. Chiquita also conspired in setting up false “front” entities and fictitious contracts to confuse authorities. The allegations include that Chiquita worked with the FARC and its controlled unions for commercial advantage, such as by subverting some unions and having Chiquita’s competition intimidated.

The complaint also charges that Chiquita provided the FARC with weapons, ammunition and other supplies through its transportation contractors. Chiquita transport systems were used to funnel weapons and ammunition.

Chiquita did so knowing, or consciously avoiding, the fact that FARC was a violent terrorist organization.

As part of its guilty plea in response to charges of unlawfully collaborating with the paramilitaries, Chiquita also admitted to a history of payments to the FARC. “Chiquita admitted to using many tactics similar to those alleged above as a means of disguising and hiding its AUC payments.”

On the assumption that these facts were true and under a permissive standard that only requires the allegations to rise above “the speculative level,” the Court made these legal rulings:

1. Allegations that Chiquita systematically concealed its conduct, if true, would suffice to bar the application of the four-year statute of limitation as a matter of equity.
2. Financial support of the FARC constitutes an act of “international terrorism,” as liability is not limited to those who actual kill or kidnap but extends to those who aid and abet the terrorists. Allegations of conspiracy were also upheld, the Court ruled, rejecting a comparison to the Coca-Cola/FARC case (In re Sinaltrainal Litigation, 578 F.3d 1252 (11^th Cir. 2009), where the “attenuated” conspiracy allegations were insufficient to “nudge their claims across the line from conceivable to plausible.” Conspiracy was sufficiently pleaded on the allegations that Chiquita, knowing the FARC was a terrorist organization, intentionally agreed to provide the FARC with money, weapons, and services, and to conceal its actions, in order to subvert local unions and protect its banana business. Many critics and commentators suggest that the District Judge’s ruling will not stand up in the Eleventh Circuit Court of Appeals precisely because of the similarity to the allegations of the Coca-Cola/FARC relationship, but others say that the drafters of the Complaint against Chiquita (and the District Judge)  learned from the Coca-Cola case to paint(or, in the Judge’s case, evaluate) a picture of much more direct and knowing support in the Chiquita case. They were also benefited, undoubtedly, by the Chiquita guilty plea recited in the Complaint.
3. Allegations were sufficiently pleaded that Chiquita provided “material support” to terrorists, in violation of 18 U.S.C. §2339a(b), by providing money, weapons, and false documentation.
4. Allegations were sufficiently pleaded that Chiquita’s FARC support proximately caused the deaths of the Missionaries, under a standard that only requires that the provision of support occurred before the killings and was a “substantial factor” resulting in the killings. This test would be satisfied if a reasonably prudent person could foresee that a harm like the killings might result from his actions. The Court rejected Chiquita’s argument that plaintiffs should have to show that the killings would not have occurred ‘but for” Chiquita’s support of the FARC. And the court did not require any more specific nexus between the payments and the acts resulting in the Missionaries’ deaths.

***

In the next and concluding chapter, I will summarize some of the key lessons to be learned from the Chiquita case.

What does the Chiquita case mean for investors with present or prospective activities in Colombia? Are reports of perceptions of corruption an indication of the Justice Department aggressively challenging companies doing business in Colombia?  Is the FCPA a trap for investors in Colombia?

Only the unwary. As I wrote in Part One, best practices of international business require careful monitoring and training of managers and others to prevent corrupt payments, and to keep accurate records. But Colombia does not seem to be a disproportionate focus for FCPA prosecutions and investigations, and although there have been noted Alien Tort Statute claims by union leaders’ heirs, alleging wrongful death, they have not been successful. Will the newest Chiquita Brands’ cases, following after its $25M plea agreement with the DOJ, end differently?

The first prosecution I could locate involving Colombia involved the Harris Corp. (The Harris case is reported on the Shearman & Sterling FCPA Cases site.)  In the summer of 1990, Harris won an acquittal on FCPA charges.

Currently, the FCPA Blog reports that the Department of Justice is investigating military contractors generally, in connection with what is called the “Shot-Show” cases involving the Republic of Georgia. The FCPA Blog reports about the implications for Colombia:

There are indications of more foreign bribery involving the military-equipment industry; the allegations in the first 16 indictments (available here) and the superseding information may be the tip of the iceberg. 

The Justice Department is seeking to build bigger cases against some current defendants. It may also indict other individuals.

Investigators could also be looking at involvement by some well-known industry leaders — an Indian military-equipment supplier, three U.S. public companies, and two large private security contractors among them.

Countries and governments involved may include not just Georgia (mentioned in the superseding information) but also Peru, Mexico, Saudi Arabia, Guatemala, the Philippines, Colombia, and others. Representatives from some of the countries could be targeted by the Justice Department.

But what about those other cases involving alleged corruption in Colombia, and unionist killings?  One such case that drew a lot of attention involved Alabama coal company The Drummond Coal Company, operator of the largest open coal mine on the planet, called El Cerrejon in the Northeastern Colombian peninsula called La Guajira. This, however, was not a case involving the FCPA. Instead, it was brought under the Alien Tort Statute, as is former hostage Keith Stansell’s case against Chiquita, but the underlying “tort” or wrong alleged in Estate of Rodriquez v. Drummond Co., 256 F. Supp. 2d 1250 (N.D. Ala. 2003), was wrongful death and engaging in war crimes. Survivors of Drummond unionists alleged that Drummond conspired with paramilitaries to exterminate the union members. The United Steelworkers sent a letter to Congress describing the allegations. After the Alabama court ruled that the union had standing to sue in the United States, however, a jury found that Drummond was not liable in the deaths. The case has been appealed to the Eleventh Circuit U.S. Court of Appeals, No. 09-16216-II. Briefing appears to have been completed this month, and a decision forthcoming in a few months.

The Coca-Cola Company too has been implicated in Alien Tort Statute litigation for violence against union leaders and members in Colombia. The United Steel Workers union also was involved in litigation against Coca-Cola for allegations of crimes against union officials, Sinaltrainal v. Coca-Cola.. A campaign being waged against Coca-Cola for human rights violations around the world is called “Killer Coke” and contains a number of citations to press articles discussing various allegations. Another website details the Colombia allegations against Coca-Cola. The public affairs TV show “Frontline” covered the Coca-Cola Colombian controversy.

Coca-Cola denied these allegations, of course. Coca-Cola Company stated in its 2004 proxy:

Two different independent inquiries in Colombia —a judicial inquiry by a Colombian Court, and an inquiry by the Colombian Attorney General’s office— examined the specific issue of whether managers at a bottling plant were complicit in the murder of a trade unionist. They found no evidence to support the allegation. Further, based on internal investigations conducted by our Company and by our bottling partners, we are confident that allegations the bottlers engaged paramilitaries to intimidate trade unionists are false.

The allegations made against us in Colombia are not merely false; they are repugnant to all of us at The Coca-Cola Company. We agree with the proponents that our Company must clearly demonstrate that we and our bottling partners support human and labor rights and oppose all forms of violence. Our desire is for Coca-Cola to be seen as part of the solution to some of the business issues in Colombia today. We are convinced our current approach will allow for that outcome.

On September 4, 2006, the United States District Court dismissed all remaining claims against the two bottlers.

Here again, however, Coca-Cola was not charged with FCPA violations – payment of bribes to foreign government officials. Rather, Coca-Cola is alleged to be liable, like Drummond, for wrongful death for assisting the paramilitaries in killing unionists.

Levels of Corruption In Colombia Decreasing

The annual report of Transparency International in 2009 on corruption levels generally in Colombia show that the situation is improving, but has a long way to go. Similarly, as discussed in my articles on arbitration, there are perceptions of corruption that are discouraging to some investors that weigh down its otherwise impressive worldwide rankings for doing business.

So charges such as those lodged against Chiquita under the FCPA are relatively rare. As I will discuss in Part Three, Chiquita operated over 200 farms and controlled significant amounts of land area in two very challenging parts of Colombia: the Uraba region adjacent to the Panama border, and the Santa Marta region in Northeast Colombia, adjacent to Venezuela. Both were dominated first by FARC and ELN communist guerillas, then they were displaced by the paramilitary Autodefensas Unidas de Colombia. The paramilitaries became, over time, very closely connected to weak Government forces and the military, and there were decrees and other laws specifically coordinating with the paramilitaries during the very late 90’s and into the early 2000’s.  Like the guerillas before them, the paramilitaries exacted security payments from landowners like Chiquita – i.e., extortion.

But how far did Chiquita go in making these payments and cooperating with the guerillas and then the paramilitaries? The new cases allege that the Chiquita payments were to de facto governments in those areas, and therefore were not just actions complicit in numerous deaths, but corrupt payments to foreign government officials. In Part Three I will delve into these allegations and this theory more deeply.

Former FARC hostage Keith Stansell sued Chiquita Brands International, after being held more than 2000 days in captivity held by leftist guerillas of the FARC (Revolutionary Armed Forces of Colombia).[i] Stansell alleges that Chiquita Brands made corrupt payments to the FARC – bribes, in his view; extortion, according to Chiquita and its Colombian counsel, in order to ensure the safety of Chiquita’s workers at its more than 200 banana farms in Colombia.

The FARC shot down a plane carrying Stansell and three Northrup Grumman employees. Thomas Janis, the pilot, died, and the other two were force-marched into the jungle and captivity after the plane crash. Stansell’s complaint against Chiquita joins complaints filed by some of Janis’s heirs and nearly 200 plaintiffs.

Chiquita has paid a fine – US$25 million – and made other agreements with the Department of Justice, for allegedly corrupt payments to the FARC’s mortal enemy, the paramilitary Autodefensas Unidas de Colombia (AUC). With the considerable defense of Chiquita mounted by now-Attorney General Eric Holder (when he was in private practice), the Company did not have to pay the $75 million first demanded. 

“Sixty Minutes” ran a tough story on the case.  Chiquita faces liability to sympathetic plaintiffs – it lost a motion to dismiss their case decided by a judge who is hearing numerous complaints against Chiquita that have been consolidated for pre-trial treatment. These new plaintiffs are represented by litigation powerhouse Boies Schiller & Flexner’s Lee Wolosky, a former White House counterterrorism official in both the Clinton and second Bush administrations. In addition, there are shareholder derivative actions lodged against Chiquita Brands.

The Chiquita case – cases, really – teach a lot about risks that companies face – and can and should avoid. This article provides information about compliance with the Foreign Corrupt Practices Act (FCPA) and its aggressive enforcement, and outlines best practices to avoid liability.  In Part II, I look at Colombian FCPA cases, and in Part III I take a detailed look at the Chiquita allegations and the findings of it special litigation committee investigation. The conclusion, Part IV, will summarize the very unique nature of the Chiquita facts while cautioning that active compliance efforts are nevertheless necessary in Colombia as elsewhere. 

Some Background About The FCPA

The Law’s Requirements

The U.S. Department of Justice’s anti-corruption efforts are centered on the Foreign Corrupt Practices Act (“FCPA”). This law, first passed in the late 1970’s, has been reinvigorated by aggressive enforcement in recent years.

The FCPA has three main parts. The first prohibits bribing foreign government officials. The second requires accurate books and records. The third requires appropriate internal controls to prevent bribery and to preserve records. 

These parts function independently. If bribes are paid, that violates the first part of the FCPA and can result in prosecution.  If payment of that same bribe, however, is not reflected on the company’s books, the company and its personnel can be prosecuted additionally for violating both the FPCA’s books and records provision and its internal controls’ provision.[ii] 

The FCPA does not set a minimum; it has no materiality requirement.  Even what some might consider just a “small” bribe, or one made to lower level government officials (including employees of state-owned enterprises), can be sufficient to subject the company to criminal prosecution under the FCPA.  

High Prosecution Priority

By 2009, according to comments made by Mark Mendelsohn, the DOJ deputy chief overseeing FCPA prosecutions, as reported in the Wall Street Journal, there were already over 120 open Department of Justice (“DOJ”) investigations into possible FCPA violations,[iii] and between 1998 and 2008, over 60 multinational companies (and numerous more company executives) have been prosecuted for violating this federal law — the majority in the last five years. (The DOJ does not make any ongoing tabulation of open cases available to the public. Therefore I am not aware of how much this number has grown since his comments.) In the previous two years, the DOJ and the Security and Exchange Commission (“SEC”) settled FCPA enforcement actions against some of the world’s largest companies — and prosecuted corporate executives — for bribery schemes in such far-flung countries as Honduras, Egypt, Iraq, Haiti, Malaysia, Korea, Bangladesh, Yemen, and of course China.  Settlement terms included the largest fine ever paid by a U.S. corporation in an FCPA action — Halliburton Co.’s February, 2009 agreement to pay – along with its subsidiary Kellogg, Brown & Root LLC (“KBR”) – $579 million in combined DOJ and SEC penalties and disgorgement, primarily for bribes paid to Nigerian officials to secure contracts worth approximately $6 billion for the building and expansion of liquefied natural gas facilities in Bonny Island, Nigeria.  The violations were primarily committed – not by Halliburton or KBR itself – but by an international joint venture which included KBR.^[i]   KBR’s former chairman and CEO, Albert “Jack” Stanley, pled guilty to conspiracy to violate the FCPA and conspiracy to commit mail and wire fraud, and faces seven years in prison and restitution of over $10 million.  (Albert Jackson Stanley Plea Agreement, September 3, 2008).  Only three months earlier, in December 2008, German corporation Siemens agreed to the largest FCPA settlement ever: $1.6 billion in combined SEC and DOJ penalties – also for bribing Nigerian officials to secure Bonny Island contracts.^[ii]

Managing FCPA Risks – Best Practices

How is the market dealing with FCPA risks? The well-advised companies with operations in Colombia, as in a large number of countries, have effective anti-corruption policies backed by robust training, auditing, and monitoring systems to prevent improper payments and keep excellent books to prove it. Indeed, Chiquita’s internal policies and controls went a long way toward preventing improper payments and relieving the effect of the circumstances that got away from the company.  The state of the art is reflected by those companies that have undergone due diligence and entered into financing arrangements with the International Finance Corporation (IFC) (see articles here).

With the assistance of experienced outside counsel, there are several key steps companies with far-flung operations can take to minimize FCPA exposure. My partner Scott Peeler offers this advice:

• Internal Compliance Controls – These measures focus on “red flags” that may exist in a company’s books and records, such as unusual payment patterns to outside consultants or foreign officials that conduct business with the company.  Corporations must recognize when they are doing business in a country with a history of corruption, their controls and monitoring activities must be much stronger than in other parts of the world.  Companies should set up hotlines or other confidential reporting mechanisms to encourage employees to alert the company to potential illegal activities of any kind, including the payments of any form of bribe.
• Training – Employees and management worldwide should be trained about the scope of the FCPA and the potential consequences for violating it.  Employees should be trained in their native language to guarantee that they understand the complexities of the law and how it can be applied in many different situations around the globe.  In addition, the company’s code of conduct should include language about the FCPA and be translated into the employees’ native language to insure they understand this critically important law.
• Interviews – A company should interview employees and consultants to determine which persons have connections to, and transact regularly with, foreign officials (including employees of state-owned enterprises).  Intense screening and background checks should be done on these employees to monitor their ongoing contacts with foreign officials. 
• Compliance Officers – A large company with operations in many different countries, especially those with a history of corruption, should hire compliance officers familiar with the FCPA and other countries’ anti-corruption provisions who can ensure that a company’s activities are being accurately reflected in the books and records. 
• Due Diligence – To avoid successor liability in a merger or acquisition, anti-corruption due diligence of the target company should be as complete as possible before the deal closes.  Voluntary disclosure of pre-acquisition FCPA violations, either to the SEC or DOJ, has led to favorable settlements for several corporations. 
• Internal Investigations. Once possible violations are detected, it is vitally important to involve outside counsel who understands the nuances of the FCPA and can help spearhead an internal investigation and an intelligent and practical legal strategy.  Internal investigations – coupled with enhanced compliance measures – are often the key to determining a proper course of action.

Disclosing FCPA Violations

There has been a huge increase in the number of U.S. companies making public or private disclosures of their actual or suspected FCPA violations.  The FCPA does not establish disclosure requirements of violations, voluntary or otherwise, nor does it set disclosure requirements for US public companies. Rather, companies make disclosures in order to avoid civil and criminal liability for omitting material information in their public disclosure documents, and they also make voluntary disclosures to the DOJ or SEC in order to avoid prosecution or to reduce potential civil and criminal penalties.

Is disclosure devastating to a company? It’s all relative, as non-disclosure is fool’s errand. If someone beats the company to the disclosure it can result in significantly higher penalties and the loss of some control over the company in the post-fine time period. This can happen as the result of a press report or a whistle-blower.

Disclosure can instead manage the damage.  Disclosure permits the company the widest available flexibility under the circumstances in negotiating with the DOJ an agreement to install a monitor to detect (or, better said, prevent) future improper payments.

Some insight on corporate disclosures relating to doing business in Colombia can be gained from the following resources.

FCPA 10K disclosures: oil and gas exploration company Apco provides more insight into this risk by stating that it has significant operations in Colombia, where there has been a 40-year conflict between the government and anti-government armed insurgent groups. Accordingly, “the ability of the Colombian government to maintain security in the areas where we have operations may not be successful and there is no assurance that guerilla related violence will not affect our operations in the future, resulting in losses or interruptions of our activities.” Should one think that Canadian companies do not run similar risks in the global economy, Calgary-based Gran Tierra’s recent 10-K contains a similar disclosure.

See also 10K Disclosures: Foreign Corruption, Watch Out.

Corporate Compliance Monitors

The DOJ’s Assistant Chief in the Criminal Division’s Fraud Section in charge of FCPA activity is Charles Duross, who the DOJ quoted on its website recently in a piece entitled “Corporate Compliance Monitors Are Here To Stay.” Duross spoke at the invitation of my law firm, Arent Fox LLP, at a public seminar on FCPA in Washington, where he said corporate compliance monitors will continue to be used in deferred prosecution and plea agreements, but that the department is sensitive to the concerns of businesses.

“Corporate monitors are not going away,” Duross said. “But I think we’ve become more sophisticated and refined with our use of them. We’re wary of corporate monitors gone wild. We don’t put monitors in to ruin a company.”

Duross’ comments came during a panel discussion on the Foreign Corrupt Practices Act Thursday morning. Duross, who is an Assistant Chief in the Criminal Division’s Fraud Section, was joined by Cheryl Scarboro, the chief of the Securities and Exchange Commission’s FCPA team, for a wide-ranging discussion of the statute moderated by my Arent Fox partner Andrew Kaizer.

(A full recording of the Arent Fox FCPA event is a must-hear.)

Not to be outdone by its sister enforcement agency, the DOJ recently instituted a group of related cases in California federal court which showcase its newest tactic of expanding anti-bribery prosecutions beyond the traditional application of the FCPA.  Valve manufacturer Control Components, Inc. pled guilty to charges that it violated not only the FCPA but also the Travel Act (18 U.S. C. §1952).  (Press Release, Control Components Inc. Pleads Guilty to Foreign Bribery Charges and Agrees to Pay $18.2 Million Criminal Fine, July 31, 2009, (“CCI Press Release”) available here.)  Six former CCI employees were also indicted under both the FCPA and the Travel Act, but have pled not guilty.  The Travel Act prohibits travel between states or countries – or using an interstate facility – in aid of any crime.  (18 U.S. C. §1952.)  Importantly, however, the underlying crime triggering the violation need not be a federal crime.  In the case of CCI, the DOJ alleged that they violated or conspired to violate a state law – California Penal Code section 641.3, which prohibits solicitation or payment of bribes of more than $1,000 anywhere.  (Cal. Pen. Code § 641.3(a)).  The DOJ alleged that CCI employees traveled to Malaysia and the United Arab Emirates, where they paid approximately $1.95 million in bribes to officers and employees of foreign and domestic privately-owned companies, in order to obtain or retain business for CCI.  (CCI Press Release.)  In other words, through the Travel Act, the DOJ was able to use California’s state anti-corruption law to expand the scope of federal anti-corruption enforcement from its original targets (bribes to government officials) into the realm of commercial bribery (bribes not involving government officials). 

Key FCPA Resources

The Department of Justice website provides the following useful links for more information about the anti-corruption laws:

A summary of the Anti-Bribery Provisions of The Foreign Corrupt Practices Act - U.S. Departments of Commerce and Justice.

Foreign Corrupt Practices Act- U.S. Department of Justice, Criminal Division, Fraud Section

Bibliography: The Foreign Corrupt Practices Act and International Corruption

Unofficial FCPA Translations

Below are links to unofficial translations of the U.S. Foreign Corrupt Practices Act in Spanish, Arabic, Chinese and Russian. The goal of providing these unofficial translations is to increase the general awareness and understanding of the FCPA by U.S. exporters and their trading partners. For particular FCPA compliance questions relating to specific conduct, you should seek the advice of counsel as well as consider using the Department of Justice’s Foreign Corrupt Practices Act Opinion Procedure, found here. Only the official, English-language version of the statute, found here, should be relied upon for such purposes.

U.S. Foreign Corrupt Practices Act – Russian Translation (unofficial)

U.S. Foreign Corrupt Practices Act – Arabic Translation (unofficial)

U.S. Foreign Corrupt Practices Act – Chinese Translation (unofficial)

U.S. Foreign Corrupt Practices Act – Spanish Translation (unofficial)

Anticorruption Resources 

Department of Commerce — Good Governance Office

State Department brochure,  Fighting Global Corruption: Business Risk Management

United Nations Global Compact – Principle 10 Against Corruption

Transparency International – USA

Transparency International – Business Principles for Countering Bribery

The International Chamber of Commerce (ICC) – Anticorruption Activities

The World Economic Forum Partnering Against Corruption Initiative (PACI)

International Conventions and Initiatives

OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (text, commentaries, and related instruments)

OECD Recommendation for Further Combating Bribery of Foreign Public Officials in International Business Transactions

Department of Commerce Annual Reports to Congress under Section 6 of the International Anti-Bribery and Fair Competition Act of 1998

United Nations Convention against Corruption and related documents

Inter-American Convention against Corruption

Asia-Pacific Economic Cooperation: Anticorruption

[ii]  One defense to an anti-bribery allegation is that the bribe is allowed under the laws of the country wherein the transaction occurred.  This defense, however, is seldom – if ever – applicable.

[iii] Dionne Searcey, U.S. Cracks Down on Corporate Bribes, Wall Street Journal, May 26, 2009, available at http://online.wsj.com/article/SB124329477230952689.html.

[i] Securities and Exchange Commission Litigation Release No. 20897, Feb. 11, 2009; Kellogg Brown & Root LLC Pleads Guilty to Foreign Bribery Charges and Agrees to Pay $402 Million Criminal Fine, Department of Justice Press Release, Feb. 11, 2009.

[ii] Securities and Exchange Commission Litigation Release No. 20829, Dec. 15, 2008.