By Cliff Peale
The Cincinnati Enquirer

A Justice Department investigation of payments Chiquita Brands International Inc. said it made to protect its employees from threats by Colombian rebels has cast fresh light on the silent costs of doing business in one of the fastest-growing regions for U.S. trade.

The probe was disclosed Monday by Cincinnati-based Chiquita in its report of quarterly earnings.

Special payments by U.S. companies in Latin America - whether for faster telephone installation or security services - are known as "facilitating payments" and are allowed under U.S. law. Chiquita says it and other American companies have done it for years.

However, the practice has taken on a darker side in recent years as political unrest, drug-lord-backed insurgencies and heightened concerns about global terrorism have raised the stakes of doing business.

International trade analysts say that in many countries of Central and South America, an influx of investment has generated the unwanted side effect of kidnappings and violence against employees of foreign-owned companies. Often the crimes are committed by insurgent groups seeking cash to finance their operations. In response, executives have turned from paying to speed service at a warehouse or dockside to the 21st century equivalent of gangland protection payments.

"It's certainly a common understanding that in order to do business in Colombia, payments have to be made for at best security, or at worst extortion," said Ron Oswald, general secretary of the International Union of Foodworkers, which represents up to 15,000 Chiquita workers in several Latin American countries, including Colombia.

"The alternative, of course, is not to do business in Colombia," Oswald said in a telephone interview from the Argentine capital Buenos Aires.

The fertile Colombian soil generates slightly less than one-tenth of Chiquita's global banana business, or about 11 million of the 130 million boxes of bananas marketed annually by the Cincinnati-based company. And while the company said the federal investigation has not hurt profits and the leadership of its Colombian division has remained in place, the impact is being felt in other ways. For example:

• The Justice Department probe was revealed in Monday's quarterly earnings report after the close of U.S. stock markets. The disclosure stated that the probe began in April 2003 and that the government recently informed Chiquita it is evaluating the actions of the company and its officers. Chiquita stock fell almost 5 percent to $16.25 a share on Tuesday.

• Chiquita insists the probe will not impact negotiations for the sale of its operations in Colombia, known as Banadex, to a Colombian banana company. Banadex has about 4,400 employees. However, the company would not comment Tuesday on whether the decision to sell Banadex came in response to threats by Colombian groups.

• The company said it has spent close to $2 million so far this year on legal and professional costs for the investigation. Chiquita has hired the law firm of Kirkland & Ellis to handle the probe.

Company officials Tuesday would not discuss the total of the payments, when they were made or to which Colombian groups they were made. The Justice Department would not comment on the investigation. However, Chiquita said it brought the payments to the government's attention after discovering the groups appear on the State Department's list of terrorist organizations.

The 1996 Anti-Terrorism Act, passed in the wake of the Oklahoma City bombing, makes it a crime to provide material support to organizations on the list.

The law was strengthened after the Sept. 11, 2001, terrorist attacks, with a maximum prison sentence of 15 years per violation. The Justice Department has indicted 58 individuals under the act but not one U.S. corporation, a department spokesman said.

In fact, experts on Latin American trade contacted Tuesday said they can't recall a company admitting making protection payments, even though they acknowledge it happens all the time.

"These companies, particularly oil companies and some agricultural companies, they're in pretty dire jeopardy in trying to protect themselves," said Sean McWeeney, a former FBI agent and president of Corporate Risk International, a consulting firm based in Northern Virginia.

"You have to make a decision what you're going to do," he added. "We would advise them to negotiate it. If you've got to pay an extortion payment, then you've got to pay an extortion payment."

The payments can take many forms, from a "war tax" due in annual payments to simply pulling over a truck on the side of the road for a "toll" collected by insurgent groups. McWeeney said the payments he's heard about normally total less than $100,000.

"They contact almost every company that operates in Colombia," said Wes Odom, chief of operations for the Ackerman Group, a counterterrorism consulting firm in Miami. "The contact sometimes comes in the form of a letter or a telephone call. Sometimes they show up in person and demand payment. It is not out of the ordinary that there would be repercussions if they didn't pay it."

In decades-long conflicts with the Colombian government, the groups have relied on car bombings, kidnappings, political murders and landmines to make their political point.

All three Colombian groups on the U.S. terrorism list - the Revolutionary Armed Forces of Colombia, the National Liberation Army and the United Self-Defense Forces of Colombia - were designated terrorist organizations in 2003, according to the State Department's Internet site.

According to the site, the Colombian government has made progress against the insurgent groups, but the nation's murder rate is still 11 times that of the United States.

Kidnappings and drug trafficking continue, U.S. officials say. In February 2003, the Revolutionary Armed Forces, called FARC, took three U.S. contractors hostage, and they are still being held, according to the State Department site. The U.S. says that 27 American citizens have been kidnapped in Colombia since 2000.

And in September 2002, the Justice Department unsealed an indictment against the United Self-Defense Forces, or AUC, charged with trafficking more than 17 tons of cocaine into the United States and Europe since 1997.

E-mail cpeale@enquirer.com