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Missionary Murders May Send Chiquita Into Tailspin With Damages

April 2 (Bloomberg) -- Chiquita Brands International Inc., owner of the namesake banana label, may be forced to pay more than $780 million, or $18.20 a share, if found complicit in the murders of five American missionaries by Marxist rebels a decade ago in Colombia.

The missionaries' families sued March 12 in Miami, accusing Chiquita of paying the FARC guerilla group for protection and supplying it with weapons from 1989 to 1997. The case is the first against a U.S. company under a 1992 law allowing Americans to sue U.S. organizations over terrorism deaths abroad. It may reveal whether Chiquita paid the FARC to thwart competition.

The Cincinnati-based company was fined $25 million after pleading guilty a year ago to engaging in transactions with a global terrorist, after paying Colombian paramilitary militias $1.7 million from 1997 to 2004.

``Chiquita's admission that they paid these groups is half the battle," said Jean-Charles Brisard, a Lausanne, Switzerland-based consultant on terrorism financing who isn't involved in the case. ``All that's left is for the plaintiffs to prove the much easier claim that the company knew or could've known the FARC was planning to carry out crimes against Americans."

Chiquita rose 61 percent in the past 12 months, buoyed by expectations the European Union will eliminate the tariff on South American bananas, said Dean Haskell, a Morgan Joseph & Co. analyst who recommends buying Chiquita. The company lost $49 million last year on sales of $4.7 billion. The tariff is 176 euros ($275) a metric ton. The company yesterday fell 21 cents to $22.90 in New York Stock Exchange composite trading.

Watching for Risk

``Litigation risk is something we keep an eye on as events occur," said Alison Sullivan, a credit analyst for Standard & Poors in New York. Investors haven't focused on the month-old lawsuit, according to Haskell and Will Putnam, an analyst at Matrix USA LLC in New York, whose team on March 27 recommended selling Chiquita.

The suit is the seventh since Chiquita's guilty plea. Four were filed under a different law on behalf of about 600 Colombian FARC victims, seeking at least $11.8 billion in damages. Those cases were consolidated in Miami with two shareholder actions in which Chiquita is accused of harming the company's reputation with the illegal payments.

In a case not involving Chiquita, a Chicago jury in 2004 awarded the family of American teenager David Boim $52 million after finding U.S. Muslim charities financed Palestinians that killed the youth in Israel in 1996. The judge tripled the award to $156 million, as the terrorism law permits.

Boim Verdict

The Boim verdict was overturned for reasons unconnected to the amount of the award. The U.S. Court of Appeals in Chicago said the link between the charities and the shooting wasn't proved. The Boims, U.S. citizens living in Jerusalem, asked the court for a rehearing.

Gary Osen, the lawyer for the missionaries' families, called the Boim verdict ``a good benchmark." Damages in his suit probably will be higher for each death, Osen said, meaning the total may exceed $780 million.

That amount ``would be in line with what courts have done in analogous situations," Jonathan Drimmer, a Washington attorney and Georgetown University adjunct law professor who has advised plaintiffs and corporate defendants, said in an interview.

The missionaries were kidnapped in 1993 and 1994 and later killed by the FARC, which the U.S. government designated a terrorist organization, the families said in their complaint.

Their case is stronger than the Boims' because it directly links Chiquita's payments to the group's actions, Norman Abrams, a University of California at Los Angeles law professor emeritus, said in an interview.

Terrorists `Buy Guns'

``If you give money directly to a terrorist, what do they use it for?" said Abrams, who isn't involved in the suit. ``They use it to buy guns."

The families accused the grower of prompting attacks on Uniban, the Medellin-based seller of Turbana brand bananas and plantains, soliciting the FARC to burn the competitor's supplies and block its exports.

Chiquita paid the FARC to intimidate labor unions and sabotage competitors as a means of ``squashing competition and assuring defendants of an accommodating labor force," the families said.

A Chiquita spokesman said the company was victimized by the FARC and was forced to pay to protect employees. The payments continued after a corporate lawyer strongly advised against them, according to court documents in the criminal case.

``We were clearly extorted," spokesman Ed Loyd said. ``We don't share the ideology of these groups."

Company Denial

Loyd rejected claims that Chiquita supplied weapons and paid the group to damage the competitor. ``That's not the type of business practice we would engage in," he said.

Myles Frechette, 72, U.S. ambassador to Bogota from 1994 to 1997, now a senior associate at the Center for Strategic and International Studies in Washington, said Chiquita faced a dilemma.

``It was a devil's choice to pay these criminals or not, given that the Colombian government was incapable of extending the rule of law," he said.

Nancy Hamm, 57, whose husband, David Mankins, was seized at their home among the Kuna Indians near the Colombia-Panama border, said the company shouldn't have paid.

``Chiquita had a choice," Hamm said by phone from Debary, Florida. ``And they chose at the expense of American lives to go on doing business in an area where they knew terrorists operated."

The case is Julin v. Chiquita Brands International Inc., 1:08-cv-20641, U.S. District Court, Southern District of Florida (Miami).

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