U.S. Business Dangers
by Bob Barr
Issue 95 - November 7, 2007

There’s trouble brewing in South America, especially for U.S. companies that maintain a visible presence in countries such as Colombia. In fact, the problems boiling over in Colombia have ramifications for American companies in any country in which there is significant internal strife. Two recent court cases highlight the legal dangers – civil and criminal – facing U.S. multinationals.

In mid-September, a federal judge in Washington, D.C. accepted a guilty plea entered to criminal charges by Cincinnati-based Chiquita Brands International. The plea, which avoided criminal charges against any current or former Chiquita executives, required the corporation to pay a huge $25 million fine. The company also had to admit it had previously paid “protection money” to at least one paramilitary group in Colombia; a group that had been entered on a U.S. government terrorist watch list.

Chiquita’s guilty plea and fine, however, is not likely to be the end of a very rocky and expensive road for the company. The Colombian government, along with a number of families in Colombia who allege the payments by Chiquita to the paramilitary group were responsible at least in part for murders committed by the group and international labor organizations, all are calling for the extradition to Colombia of the former Chiquita officials they say should be held criminally liable. Civil suits in U.S. courts for damages against U.S. companies that allegedly harm foreign persons in foreign countries are permissible under a 2004 ruling by the U.S. Supreme Court.

In fact, the second recent legal case that ought to be studied carefully by all multinational corporations involved just such a situation. In that case, recently concluded in federal court in Birmingham, Alabama-based Drummond Company – a major producer of coal – prevailed over allegations that it had made payments to paramilitary groups in Colombia, who in turn murdered several union organizers. While Drummond prevailed in its civil action – which was the first such lawsuit brought since the Supreme Court’s 2004 ruling expanding the reach of the 1789 Alien Tort Claims Act – like Chiquita, its lawyers are likely to have plenty to keep them busy for the foreseeable future.

For these and other multinational companies the dilemma in which they increasingly are finding themselves will become much more acute in the months and years ahead. In fact, Coca-Cola already is defending charges by international labor groups that it engaged in suspect practices in Colombia.

In countries like Colombia plagued by violent insurgent groups, U.S. companies are placed in a serious dilemma. On the one hand, they have a responsibility to their employees and their shareholders to protect the lives and livelihood of the employees and the fiscal resources represented by their plants and offices in the foreign country. At the same time, the host country’s ability to consistently marshal the military and police resources to provide adequate protection is often little more than a mirage; and sometimes there is not even the pretense of adequate protection. The ability or willingness of the U.S. government, through the American Embassy, to step into the breach and protect the human and financial resources of U.S. companies is virtually non-existent – unless the companies happen to be in Iraq, where massive protection is the order of the day. Laws in many countries in which American companies operate do not allow or else strictly limit the ability of the foreign companies to provide significant armed protections themselves.

As a practical matter, the only viable option available to companies facing threats to its people and physical resources may be paying outside groups to help maintain security. In the post-911 world, however, such moves may net the corporation criminal charges if the entities to which it has paid for protection happen to appear on a State Department watch list of terrorist organizations. The Chiquita case illustrates how an American company can be squeezed in such a scenario; the Drummond case represents a civil hammer that is likely to be employed more and more to pressure companies. And, waiting in the wings, is the Democratic-controlled Congress, which already is gearing up for hearings sought by labor groups to beat up on U.S. companies in Colombia and elsewhere.

American multinationals will be finding the list of options that will neither land them in jail or subject them to massive fines, fast vanishing. The U.S. economy and our balance of payments – both of which depend in part on robust and active investments abroad by American companies – ultimately will be the loser in all this.

Bob Barr is a former Congressman from Georgia.