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Chiquita Brands agreed in mid-March to pay a $25 million criminal fine over payments to a paramilitary group in Colombia made to protect the company’s employees from threatened violence. News accounts were generally unfavorable to Chiquita, emphasizing Chiquita’s payments to a “terrorist group” and generally mentioning only as an afterthought Chiquita’s justifications for making such payments. Yet Chiquita in fact faced an unpleasant choice between the safety of its Colombian workers and the demands of U.S. law. Perhaps because this dilemma was so understandable, the company seems to have believed that the Department of Justice would have little taste for prosecuting the victim of extortion. Surprisingly, however, the government had no such reservations and vigorously pursued Chiquita. It did so notwithstanding the equities of the case and the deficiencies in the prosecution’s case, set forth in the criminal information that the prosecution filed in place of an indictment and as the basis of the plea bargain. COLOMBIA BATTLES To understand the complete story, some background on the paramilitary group is helpful. The group was the United Self-Defense Forces of Colombia (known as the AUC, from its name in Spanish). The AUC is a right-wing paramilitary group opposed to left-wing rebel forces such as the Revolutionary Armed Forces of Colombia (known as FARC from its name in Spanish). The AUC assassinated and massacred not only FARC rebels but also trade unionists, leftist intellectuals, and politicians. The AUC financed itself through the production and trafficking of cocaine. It also received payments from landowners and business interests in exchange for protection against the rebel forces. Some or all of these activities led in 2001 to the State Department designating the AUC as a Foreign Terrorist Organization and the Treasury Department’s Office of Foreign Assets Control designating it as a Specially Designated Global Terrorist. Chiquita’s involvement with the AUC began in 1997, when Carlos Casta�o, then the head of the AUC, met with officials of C.I. Bananos deExportaci�n S.A. (Banadex), Chiquita’s wholly owned Colombian subsidiary. During that meeting, Casta�o indicated to the general manager of Banadex that it should make certain payments to avoid physical harm to Banadex employees. It is not clear from the Department of Justice’s written allegations whether Casta�o was suggesting that the payments were necessary to avoid violence against employees by the AUC or were necessary to obtain protection by the AUC from violence by other groups. More likely it was the latter. PAYING THE AUC As a result of this meeting, Banadex began to make the requested payments to the AUC. At the time Banadex began to pay, the AUC had not been designated as a terrorist group, meaning that the payments to the AUC did not violate U.S. law. According to the criminal information, unnamed “high-ranking officers” of Chiquita were aware of and approved these early payments to the AUC. It was not, however, until February 2003 that management of Chiquita learned that the AUC had been designated as a terrorist group in September 2001. At that point, Chiquita consulted with outside legal counsel who advised Chiquita (arguably incorrectly) that the payments were illegal. In April 2003, the board of Chiquita was first advised of Banadex’s payments to the AUC. The board instructed the company to disclose the matter immediately to the Justice Department. One board member proposed that the company should sell its operations in Colombia. Chiquita officials met with the Justice Department in April 2003. After the meeting, those officials believed that the department had indicated that it wouldn’t pursue Chiquita for previous payments. The criminal information against the company neither confirms nor denies that the government had made such an indication about past payments, but it does explicitly state that government officials admitted in that meeting that “the issue of continuing payments was complicated.” Banadex employees continued to pay the AUC, and the Chiquita board learned about this in December 2003. One board member reiterated his opinion that the company should sell its operations in Colombia. Banadex made three more payments to the AUC after that meeting, the last of which was paid in February 2004. In total, about $875,000 was paid to the group. In June 2004, Chiquita sold Banadex. THE GOVERNMENT’S CASE The central difficulty with the government’s case is whether payments made in Colombia by Colombian employees of a Colombian corporation violate U.S. law. The criminal information cites two violations — a violation of 18 U.S.C.�2339B(a) by providing material support to a designated “Foreign Terrorist Organization” and a violation of 50 U.S.C.�1705(b), which makes it illegal to willfully violate Treasury regulations by providing funds to a “Specially Designated Global Terrorist.” Of these two, the criminal information explicitly charges Chiquita with a violation of 50 U.S.C.�1705(b) only. The basis of the government’s claim that Chiquita violated 50 U.S.C.�1705(b) is the Treasury regulations that forbid payments to designated terrorists such as the AUC by U.S. persons. The regulations further make clear that a U.S. person is a U.S. citizen or a company organized under the laws of the United States. Banadex, which made the payments, was not a U.S. person under that definition, and its payments were not a violation of U.S. law. Chiquita and its U.S. employees would have violated the regulations only if they could be found to have engaged in a conspiracy with the Colombian employees to make the payments or to have provided services to the AUC in violation of OFAC’s regulations. It would strain the plain meaning of the law to find that Chiquita either conspired with its Colombian subsidiary or somehow provided services to the AUC by facilitating that payment based solely on Chiquita’s knowledge of those payments. Moreover, this interpretation would have serious repercussions on multinational companies that currently do business in sanctioned countries — such as Iran and Sudan — through their foreign subsidiaries. OFAC rules prohibit U.S. persons from doing business in various countries, and the rules dealing with such sanctioned countries define “U.S. person” in the same way as the Specially Designated Global Terrorist regulations do. As a result, the general understanding of the Treasury rules — and the understanding under which a number of companies operate — is that foreign subsidiaries may do business in sanctioned countries or with sanctioned individuals provided that two conditions are met. First, the foreign subsidiary cannot have been created solely for the purpose of doing business with the sanctioned country. Second, U.S. employees of the parent may not actively participate in the operations of the foreign subsidiary. Being aware of the subsidiary’s activities has not been thought to be alone a sufficient basis for finding such active participation. In this case, arguably one Chiquita employee (called “Individual C” in the criminal information) may have stepped over the line from knowledge to participation by approving a change in the method of paying the AUC. But whether it is appropriate to make the leap from this one action by one officer to criminal liability of the entire corporation is questionable. The criminal information filed by the government also struggles with the requirement that the defendants had to have acted willfully. The statute, 50 U.S.C.�1705(b), provides, “Whoever willfully violates any license, order, or regulation issued under this chapter shall, upon conviction, be fined not more than $50,000, or, if a natural person, may be imprisoned for not more than ten years, or both.” The requirement of willfulness here is not merely that Chiquita Brands, Individual C, or other employees knew that the payments were being made. They also must know that the AUC was a designated terrorist and that payments to it therefore violated the regulations. As a result, the government spends considerable time in the information alleging that Chiquita had become aware of the designation of the AUC as a terrorist shortly after that designation and that it has thus been aware for some time that payments to the AUC were illegal. None of the government’s evidence for willfulness is convincing. The chief argument is that the AUC’s designation was “reported in the national press (for example in the Wall Street Journal and the New York Times) on September 11, 2001.” Of course, it seems reasonable to suppose that few people, if any, were perusing any newspaper on the day of the attacks on the World Trade Center and the Pentagon. The government further alleges that stories of the AUC’s designation appeared in newspapers in Cincinnati, where Chiquita’s headquarters are located, on Oct. 6 and 17, 2001. No evidence is presented, however, that anyone at Chiquita Brands who was aware of the payments to the AUC read those press reports. Nor does the government’s reliance on press reports in Colombia seem relevant, given that it is almost certain that none of Chiquita’s U.S. employees read them. Finally, the criminal information notes that an unnamed employee of Chiquita (called “Individual H”) accessed a Web page that reported the designation of the AUC as a Foreign Terrorist Organization. That Web page, however, did not provide information that the AUC was later designated as a Specially Designated Global Terrorist, which is the designation for the government’s allegation of criminal activity. Nor is there a shred of evidence that this employee conveyed this information to anyone else at Chiquita. AN EXCESSIVE PENALTY Even if Chiquita can be held liable for the Banadex payments, the $25 million fine seems excessive. Although the law and regulations do not provide an exception for protection or ransom payments, Chiquita’s decision to act to protect the safety of its employees in Colombia is understandable. Perhaps the prosecutors didn’t really believe the AUC’s threats, but that seems inconsistent with the demonstrated record of murder and violence that landed the AUC on the terrorist list in the first place. One has to wonder whether the result might have been different if the threat had been made against U.S. employees rather than Colombian employees, including field workers. Further reasons for lessening the penalty seem to have had no impact on the government. Chiquita voluntarily disclosed the violations to the Justice Department and appears to have been told, at least initially, that past payments would not be pursued but that continuing payments were “problematic.” This disclosure occurred promptly after the Chiquita board learned of the problem. Ultimately, Chiquita properly responded to its dilemma by ending its operations in Colombia. Chiquita’s dilemma is unlikely to be unique. There has been substantial speculation that companies doing business in Iraq and elsewhere in the Mideast may have paid ransoms to secure the release of kidnapped employees. Laws that forbid providing financial assistance to terrorist organizations were not conceived with the problems of ransom and protection payments in mind. The policy behind these laws needs to be reviewed in light of this reality to achieve a proper balance between the government’s interest in cutting off funds to terrorists and the competing interest a company has in protecting its employees. Without such a balance, U.S. companies might feel compelled to end operations in countries such as Afghanistan and Iraq, where the interest of the United States in reconstruction would be harmed if those companies withdrew. Until the policy of these laws can be reviewed in light of these considerations, prosecutorial discretion should be used in future cases to reach a fairer result than the one obtained in Chiquita’s case.
Robert Clifton Burns is a partner in the export controls practice of Powell Goldstein in Washington, D.C. He is also an adjunct professor at Georgetown University Law Center.

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