Independent Review of Chiquita's Payments to Paramilitaries in Colombia

An update in the Alien Tort Statute/shareholder derivative litigation against Chiquita. The report mentioned is actually more significant in the shareholder suits, but it's conclusions are pretty surprising given the facts. An article in Spanish here.

Under federal law for derivative cases, Chiquita's board of directors had to set up the independent committee in April 2008 to decide whether it should sue on behalf of shareholders who sued to recoup some of the $25 million criminal fine.

The committee concluded in its Feb. 25 report that the suit should be dismissed.

"The defendants made mistakes, some more significant than others. Those mistakes were made in the belief that the actions being taken were in the best interests of the company and were to protect the lives of the company's employees," the report said.

William J. Wichmann, another family attorney, said the committee's factual summary was illuminating, but its conclusions were not.

Payments to paramilitary groups were made by Banadex, Chiquita's subsidiary in Colombia. At various times from 1989 to 2004, Banadex paid the Revolutionary Armed Forces of Colombia, or FARC; the National Liberation Army, or ELN, and the United Self-Defense Forces of Colombia, known as AUC. Payments to AUC continued even after it was named by the State Department as a foreign terrorist organization in September 2001.

"It seems incredible that the special litigation committee could find no fault that they [Chiquita officials] continued to pay them. In fact, I find that shocking," said Wichmann, a Fort Lauderdale solo practitioner.

In fact, Chiquita was told by multiple lawyers multiple times to stop making the payments before it finally did.