Chiquita and the Downside of Paying Terrorists

(MoneyWatch)  Here's a lesson you probably won't find in any management textbook: Don't hire thugs to terrorize your competitors.

It's a good lesson whether or not the Cincinnati-based Chiquita Brands International is found to be complicit in the murders of five American missionaries in Colombia. The company is accused of just that in a lawsuit filed last month.

Chiquita, known best for its bananas, pleaded guilty a year ago to paying Colombian paramilitary militias $1.7 million between 1997 and 2004.

The company insists that the paramilitary groups extorted it -- and that seems likely. Nonetheless, the guilty plea has opened the door to seven lawsuits ?€" so far ?€" against the company, possibly exposing it to many billions in damages. Some of the earlier suits, all filed in U.S. federal courts, were lodged by families of murdered Colombians, and some by shareholders who accuse Chiquita of harming the company's reputation.

The latest lawsuit accuses the company of paying the Marxist rebel group FARC to thwart competitors and intimidate labor unions in Colombia. The plaintiffs say Chiquita solicited FARC to burn competitors' supplies and block their exports. Chiquita says it had to pay to protect its employees from harm, and that it never solicited the groups to do anything.

FARC used Chiquita's money to buy weapons, which were used to kill the missionaries, the plaintiffs claim.

Court papers show that a corporate lawyer strongly advised against making the payments, according to Bloomberg News.

Despite how awful it all sounds, it's possible to conjure up some sympathy for Chiquita, assuming it really was a victim of extortion. If the choice is between keeping your own people safe from harm and writing a check, what are you supposed to do? Doing business in Colombia, where police protection is a joke and paramilitary groups are in charge of vast swaths of the country, is a dangerous proposition.

Still, Chiquita knew all that even as it continued to pursue the "endless supply of tropical gold," as a Los Angeles Times editorial put it last week. Faced with such a choice, the best thing would have been to get its employees out of there and take its losses. In the end, it may end up losing far more in court. It already has lost most of its moral capital.