In 1997 Chiquita banana began paying ”protection money” to a group know as the United Self-defense Forces of Colombia (AUC) rather than pull out of the rejoin, an area the buisness had been working in going back several generations. Had they not paid employees villages would have been massacred as well as stockholder value would have dropped. In September of 2000 an internal audit showed the practice of payoffs to the board. On September 10, 2001 the AUC was declared a terrorist organization by the Untied States, making it illegal for the corporation to continue the practice.
On April 24 of 2003 Chiquita approached the U.S. Justice Department and voluntarily self-disclosed the practice. Michael Chertoff, then assistant attorney general (currently Secretary to Homeland Security) told the corporation what they were doing was illegal and said they would receive instructions on what to do. AUC remains an opposition group to FARC, another terrorist organization, and it was clear if Chiquita were to divest from the rejoin then U.S. security interest would be jeopardized. AUC was not networked to international terrorist groups such as FARC is.
No reply was received from the government despite repeated inquiries from Chiquita. During this time a new government in Colombia, which backed Bush’s anti-terrorism protocol, was established. It was clear to the U.S. government that speaking against this issue would up set the political foot hold the U.S. was losing in South America.
By the summer of 2007 the U.S. government responded. Chiquita had paid $1.7 million to the AUC up until that point. The government placed a $25 million dollar fine on the buisness due to the decade of funding terrorism despite Chiquita’s approaching them 5 years earlier and the reclassification of the AUC in 2001.
Should the date of the AUC’s terrorist classification effect how they were delt with?
Other than stockholders were there other stakeholders Chiquita was obligated to take into consideration?
Was the government’s reaction appropriate?