Banana producer says Colombian unit made protection payments to groups U.S. regards as terrorists.
(Reuters) - The U.S. government is investigating Chiquita Brands International Inc. for making "protection" payments to certain Colombian groups which the U.S. says are terrorist organizations, the company said Monday.
The announcement came on the same day the Cincinnati-based distributor of bananas and other fresh fruits reported first-quarter net income falling to $20 million, or 46 cents per share, from $25 million, or 62 cents, a year ago.
Chiquita Chief Executive Fernando Aguirre said in a conference call with analysts that the company is taking the investigation "very seriously, but believe it's manageable."
"I want to stress that this issue only involves our Colombia subsidiary," Aguirre said.
The Department of Justice recently indicated it will be evaluating the role and conduct of the company and some of its officers into a matter involving Chiquita's banana subsidiary in Colombia, Chiquita said.
In April 2003, the company's management and audit committee voluntarily disclosed to the Justice Department that its subsidiary had been forced to make "protection" payments, according to Chiquita.
The payments went to certain groups in Colombia that have been designated as foreign terrorist organizations under U.S. law, the company said.
Chiquita said the groups made threats against the company's workers and that it made the payments only to protect its employees.
Chiquita disclosed the matter to the Justice Department when the company learned that supporting such a federally labeled terrorist organization is a criminal act under a U.S. statute, the company said.
It is an open secret in Colombia that companies are occasionally forced to buy off illegal armed groups fighting in the country's four-decade-old war, but Chiquita's admission appeared unprecedented.
Chiquita ships bananas from plants in northern Colombia in areas with a heavy presence of the outlawed far-right United Self-Defense Forces of Colombia, which is responsible for some of the worst human rights abuses in recent Colombian history.
Known by its Spanish initials AUC, it has killed thousands of people, mainly peasants, for suspected links to Marxist rebels over the past few years. It also traffics cocaine, according to U.S. officials.
Human rights groups say the AUC worked closely with the army in a push against rebels in the Uraba banana growing region in the 1990s. The government says any soldiers caught cooperating with the AUC will be prosecuted.
The AUC, now negotiating peace with the government, has targeted unions, which it often accuses of being guerrilla fronts.
A Colombian union is currently trying to sue Coca Cola (KO: Research, Estimates) for the murder of a worker by paramilitaries at a bottling plant in 1996. The soft-drink company says it had nothing to do with the incident.
Banana prices this year fell sharply from the year-earlier period, when flooding in Costa Rica and Panama limited supply.
Net sales for the quarter rose to $793 million from $471 million a year earlier. Atlanta AG, a German fresh produce distributor acquired at the end of March 2003, accounted for $283 million of the increase, Chiquita said.
The remainder resulted from favorable European exchange rates and increased sales of other fresh produce, the company said.
The company said it is cooperating with the Justice Department investigation.
Shares of Chiquita (CQB: Research, Estimates) fell 21 cents, or 1.2 percent, to $17.10 on Monday on the New York Stock Exchange before the company's late-day announcement.