02Aug07

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In Terrorism-Law Case, Chiquita Points to U.S. Firm Says It Awaited Justice Dept. Advice

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On April 24, 2003, a board member of Chiquita International Brands disclosed to a top official at the Justice Department that the king of the banana trade was evidently breaking the nation's anti-terrorism laws.

Roderick M. Hills, who had sought the meeting with former law firm colleague Michael Chertoff, explained that Chiquita was paying "protection money" to a Colombian paramilitary group on the U.S. government's list of terrorist organizations. Hills said he knew that such payments were illegal, according to sources and court records, but said that he needed Chertoff's advice.

Chiquita, Hills said, would have to pull out of the country if it could not continue to pay the violent right-wing group to secure its Colombian banana plantations. Chertoff, then assistant attorney general and now secretary of homeland security, affirmed that the payments were illegal but said to wait for more feedback, according to five sources familiar with the meeting.

Justice officials have acknowledged in court papers that an official at the meeting said they understood Chiquita's situation was "complicated," and three of the sources identified that official as Chertoff. They said he promised to get back to the company after conferring with national security advisers and the State Department about the larger ramifications for U.S. interests if the corporate giant pulled out overnight.

Sources close to Chiquita say that Chertoff never did get back to the company or its lawyers. Neither did Larry D. Thompson, the deputy attorney general, whom Chiquita officials sought out after Chertoff left his job for a federal judgeship in June 2003. And Chiquita kept making

payments for nearly another year.

What transpired at the Justice Department meeting is now a central issue in a criminal probe. According to these sources' account, the Bush administration was pulled in competing directions, perhaps because its desire to avoid undermining a newly elected, friendly Colombian government conflicted with its frequent public assertions that supporting a terrorist group anywhere constitutes a criminal offense and a foreign policy mistake.

Chiquita's executives left the meeting convinced that the government had not clearly demanded that the payments stop. Federal prosecutors, however, are now weighing whether to charge Hills; Robert Olson, who was then Chiquita's general counsel; former Chiquita CEO Cyrus Friedheim; and other former company officials for approving the illegal payments, according to records and sources close to the probe.

The company has already pleaded guilty to making $1.7 million in payments to the United Self-Defense Forces of Colombia (AUC), and it agreed to pay a $25 million fine. But last week, lawyers for the former Chiquita executives sent letters to the Justice Department, asserting that their clients did not intentionally break the law but believed they were waiting for an answer from the highest levels of the Bush administration.

Federal prosecutors have said in court papers that Chertoff and his deputies at Justice made clear in the April 2003 meeting that Chiquita was violating the law and that "the payments . . . could not continue."

Government sources say that lawyers at Justice headquarters and the U.S. attorney's office in Washington were incensed by what they considered the flagrant continuation of these payoffs, despite the warnings.

Chiquita International's lawyer in this case, Eric H. Holder Jr., said he is concerned that company leaders who chose the difficult path of disclosing the corporation's illegal activity to prosecutors are now facing the possibility of prosecution.

"If what you want to encourage is voluntary self-disclosure, what message does this send to other companies?" asked Holder, deputy attorney general in the Clinton administration. "Here's a company that voluntarily self-discloses in a national security context, where the

company gets treated pretty harshly, [and] then on top of that, you go after individuals who made a really painful decision."

Chertoff, through spokesman Russ Knocke, refused to discuss the case. "I'm declining all comment, because there is an investigation ongoing," Knocke said.

Justice Department spokesman Dean Boyd also declined to comment on the details, citing the pending criminal probe. But he stressed that any company has a responsibility to comply with the law.

"If the only way for a company to conduct business in a particular location is to do so illegally, then the company probably shouldn't be doing business there," Boyd said.

But legal sources on both sides say there was a genuine debate within the Justice Department about the seriousness of the crime of paying AUC. For some high-level administration officials, Chiquita's payments were not aiding an obvious terrorism threat such as al-Qaeda; instead, the cash was going to a violent South American group helping a major U.S. company maintain a stabilizing presence in Colombia.

The prosecution first centered solely on Cincinnati-based Chiquita, the world's largest banana producer and one of its largest food-distribution companies. It has operations in 70 countries and 25,000 employees, and has been in Colombia for more than a century, dating to the days when the company was called United Fruit.

Starting in 1997, according to court filings, Chiquita's subsidiary in Colombia, Banadex, began making cash payments to AUC. The payments were suggested by AUC leader Carlos Castano, who said he planned to drive the left-wing Revolutionary Armed Forces of Colombia (FARC) guerrillas -- a group also on the U.S. terrorist list -- out of the northwest region of Uraba, according to the filings.

In September 2000, Chiquita executives learned about the payments in an internal audit but allowed them to continue, according to a prosecution filing not disputed by the company. In the plea agreement, Chiquita officials said they knew that AUC was blamed for numerous killings and kidnappings in the region, but that they had no alternative to keep their workers alive and to secure their operations at a time when FARC guerrillas were blowing up railroads used by U.S. companies and kidnapping foreigners for ransom.

On Sept. 10, 2001, the State Department declared AUC an international terrorist group, making it illegal for a U.S. company to deal with the organization. Prosecutors say senior company executives were aware of the designation in 2002, and internal Chiquita records state that the company's outside legal counsel warned them in February 2003 that they "must stop payments."

"Bottom line: CANNOT MAKE THE PAYMENT," the Kirkland & Ellis law firm advised Chiquita, according to court records and sources.

On April 3, 2003, Chiquita's board decided to disclose the payments to Justice. Around that time, Chiquita counsel Olson told others that he and Hills thought the company had a strong defense and should let the Justice Department "sue us, come after us" if it disagreed, according to court records and sources.

Then, on April 24, the company executives met with Justice officials, including Chertoff. They disclosed the payments and Justice officials said they were against the law. Hills said he agreed, but stressed that Chiquita would have to withdraw from the country if it did not pay AUC, and noted this could affect U.S. security interests in that region.

That's when, according to the five sources, Chertoff acknowledged that the matter was complicated, and said that he would get back to them after conferring with other administration officials.

A week later, Hills and Olson told the company board's audit committee that Justice had advised them that there would be "no liability for past conduct" and that there was no "conclusion on continuing the payments," according to a summary of the case filed by the prosecution. The company authorized new payments to AUC starting on May 5.

After Chiquita officials got no answer from Chertoff, they met with Thompson, who praised them for "doing the right thing" in disclosing the payments, and said he, too, would try to get back to them on how to proceed, defense sources said. Thompson, now general counsel for

PepsiCo, did not respond yesterday to a request to comment.

Hills's lawyer, Reid H. Weingarten, said his client alerted the government to a problem, then waited as the government asked to see what the administration wanted to do. Hills resigned from the board in June.

"As soon as Rod Hills learned that there were payments to a terrorist organization, he brought the matter immediately to the attention of the Justice Department," Weingarten said. "He had a reasonable basis to believe that the Justice Department wanted to maintain the status quo

while they sorted out the difficult issues."

Robert S. Litt, an attorney for Olson, declined to elaborate on the case but said: "Bob Olson acted properly in helping Chiquita deal with a very difficult situation, and I'm confident that the Department of Justice will agree."

The attorney general of Colombia, Mario Iguaran, and other Colombian officials have dismissed Chiquita's assertions that it was a victim of extortion and paid AUC to protect its workers. An Organization of American States report in 2003 said that Chiquita participated in

smuggling thousands of arms for paramilitaries into the Northern Uraba region, using docks operated by the company to unload thousands of Central American assault rifles and ammunition.

Iguaran, whose office has been investigating Chiquita's operations, said the company knew AUC was using payoffs and arms to fund operations against peasants, union workers and rivals. At the time of the payments, AUC was growing into a powerful army and was expanding across much of Colombia and, according to the Colombian government, its soldiers killed thousands before it began demobilizing.

U.S. District Judge Royce C. Lamberth, who must decide whether to accept the Chiquita corporation's plea agreement, privately warned both sides last month that he wants to know more about the role played by Chiquita executives in approving the payments, according to sources familiar with his remarks, made in a closed meeting in his chambers.

Lamberth specifically said he wanted to know which company officials made the key decisions and whether they would face prosecution. A hearing on the plea agreement is scheduled for Monday.

Staff writer Spencer S. Hsu and correspondent Juan Forero contributed to this report.

[Source: Carol D. Leonnig, Washington Post Staff Writer, The Washington Post, 02Aug07]

Informes sobre corrupción y crimen organizado

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