The news that Chiquita has agreed to a plea bargain with U.S. Department of Justice as part of which it has agreed to plead guilty and pay a fine of $25 million in five equal annual installments has focused attention on issues of corporate morality.
Reading many articles about the announcement makes us think an awful lot of people don’t really understand the issue.
Let us acknowledge that what Chiquita did was clearly illegal. Chiquita is pleading guilty to paying “protection” money to the AUC, a Colombian based group designated as a Foreign Terrorist Organization by then Secretary of State Colin Powell on September 10, 2001. Providing material support or resources to a terrorist group is illegal.
The most significant thing to understand is that when this situation came to light, Chiquita quickly sold the subsidiary.
This is because there are areas around the world in which terrorist groups are the de facto governments.
People don’t pay protection money because they want to — they pay it because someone says they will kill the employees and blow up the facilities if the money doesn’t come.
And the U.S. government has no ability to protect companies or individuals caught in this circumstance.
After Chiquita advised the Department of Justice about the problem, the FBI and CIA didn’t leap to assure Chiquita it could stop making payments and the U.S. government would guarantee the safety of its people and facilities.
In fact the practical consequence of this law is that U.S. companies have to sell at below market prices their operations in areas taken over by terrorist groups to buyers acceptable to the terrorists!
Ask yourself this question: If Chiquita, with extensive experience in Latin America, and the ability to get the ear of high politicians in the U.S. and Colombia, felt it had no choice but to give away its money to these thugs — what price would you, as an American, banned by law from paying such payments, with less influence than Chiquita to get government to help, what price would you be willing to pay if Chiquita had offered to sell these holdings to you?
The answer is zero.
In fact the only ones who would buy the operation are people who have already made arrangements with the terrorists.
But note the law: the law does not require us to ban bananas grown in terrorist controlled areas of the world. Any U.S. importer can import all bananas it wants from regions such as this. And the fact that the non-U.S. producers have to make their own protection payments is irrelevant.
In other words, similar payments are made every day in many places around the world, and the cost of the payments is included in the price consumers pay in their supermarket shopping. It is just that in most cases U.S. executives are smart enough to know they can’t touch this and to simply walk away. Then the payments are made by non-U.S. citizens, and the U.S. companies keep their “hands clean” and simply buy product from the ones paying the protection money.
If the U.S. wants to be serious about choking off the flow of money to terrorist organizations, it needs to either protect US corporations operating in these environments or ban product from areas that terrorists control.
Making Chiquita sell its properties to someone who, almost certainly, has to make the same protection payments, may make us feel cleaner but it is not helping the war on terror.