Dangerous friends: companies feel the squeeze as U.S. laws clamp down on bribes paid abroad in the name of security.

Chiquita Brands International's confession that it made payments to Colombian paramilitaries has thrown an uncomfortable spotlight on companies doing business in the United States' principal ally in Latin America. What most are learning fast is that claiming ignorance of writing bribes off as a cost of doing business now carries significantly larger risks, including the risk of prosecution under U.S. terror laws.

The Cincinnati fresh food giant pulled out of Colombia in 2004 when it sold its subsidiary Banadex following revelations that it had paid the United Self Defense Forces of Colombia (AUC), US$1.7 million in more than 100 protection payments. Chiquita, known in Latin America as "the octopus" due to its widespread influence in the region, confessed to making the payoffs between 1997 and 2004, a decision prosecutors allege for three years violated U.S. law against payments to foreign terrorist organizations.

The payments became illegal in the United States after the AUC was placed on a list of terrorist groups alongside al-Qaeda and Hezbollah, in September 2001. The group earned that status by killing as many as 30,000 people over the years in order to seize control of more than half of Colombia's annual cocaine production.

Chiquita's Fernando Aguirre, chairman and chief executive officer, says the company was forced to make the payments to protect the lives of Chiquita employees. "The payments made by the company were always motivated by our good faith concern for the safety of our employees," he says. The group reached a plea-bargain agreement in March with the U.S. Department of Justice in which it agreed to pay a $25 million fine over five years and to implement and maintain an effective compliance and ethics program over a the same five-year probation period. At press time, a judge was considering a stiffer fine and whether to bring criminal charges against the directors involved.

"Funding a terrorist organization can never be treated as a cost of doing business. American businesses must take note that payments to terrorists are of a whole different category," says U.S. prosecutor Jeffrey Taylor. "They are crimes."

Yet the plea-bargain agreement between the U.S. government and Chiquita and U.S. rhetoric around the case has not sated Colombian prosecutors, nor trade-union lawyers investigating similar cases. "The deal that it has tried to carve out seems like a pretty good one for Chiquita. First of all, no jail time for anyone, a $25 million fine and they are not even releasing the names of the people that made the payments. That is pretty light," says Daniel Kovalik, a lawyer working for the United Steel Workers of America on another case involving a U.S. company in Colombia.

Colombia's chief prosecutor, Mario Iguaran, believes a more sinister relationship existed between Chiquita's Colombian subsidiary and the AUC groups that controlled the banana producing heartland of Uraba. "This was a criminal relationship. Money and arms and, in exchange, the bloody pacification of Uraba," he told the Colombian media. Ignaran is pushing for stiffer penalties against the company, including the extradition of the eight directors involved. The alleged use of Banadex facilities to smuggle in 3,000 AK-47 machine guns also is being investigated.

Chiquita's case is the tip of the iceberg, says Francisco Ramirez, secretary general of the federation of mining and energy unions, Funtraenergetica. "Multinational companies are the launch-pad for all the violence in this country," he says. "A third of the country's departments have mining operations of some type but 80% of the human rights abuses in this country take place in these areas."

Another high profile case working its way through U.S. courts is the case involving Alabama mining company Drummond. The company is accused of paying the AUC to kill three trade union leaders. Star witness Rafael Garcia, a former member of the AUC who worked as an insider at Colombia's top intelligence unit, DAS, and is now in prison on corruption charges, testified that he saw the president of Drummond's Colombian subsidiary, Augusto Jimenez, hand over a "suitcase of money" to a paramilitary leader intended as payment to the group "to murder trade unionists specifically linked to Drummond."

The mining company and its executives vehemently deny the allegations. In addition, Drummond said, it will not settle with the families of the murdered trade unionists as it accepts no responsibility for their deaths and has filed civil and criminal charges against Garcia for slander.

Violence against trade unionists, carried out principally by the right-wing paramilitary groups Chiquita confessed to funding, has taken center stage in the political battle in the U.S. Congress to approve a free trade agreement with Colombia, one that would affect more than $14 billion in trade between the two countries.

Colombian president Alvaro Uribe has been in Washington lobbying hard with Democrats as he seeks to have the agreement approved by Congress.

Despite an important compromise between Democrats and Republicans to include clauses on workers' rights in similar deals approved with Panama and Peru, the free trade agreement with Colombia is being singled out for special attention.

Democrats including Nancy Pelosi, Sander Levin and Jim McGovern have all refused to pass the agreement until the country's track record on trade union killings has been addressed.

Disputed. Figures on trade unionist murders vary greatly between unionists and the government. More than 4,200 union members have been killed in the last 20 years, according to Ramirez, with one murdered every six days in the last five years of Uribe's administration. Uribe argues that things have improved greatly, and that increased spending on the military provides trade unionists and businesses a safer environment than ever before.

"When this government started, Colombia had years in which they killed 126, 168, 200 trade unionists a year. We have still not reached zero, as we would like, but we would like to say to the world that so far this year there has been one trade unionist killed, and everything indicates that this had nothing to do with his work," Uribe said in an annual May Day speech. Impunity is also a thing of the past, he says, and 57 have been prosecuted for their part in trade-union killings under his administration.

Colombian unions, however, reject those claims. Union leaders say they have lost faith in their own justice system and are reverting to U.S. courts to pursue grievances for wrongful killing under the Alien Tort Claims Act, an obscure 1789 law originally meant to combat piracy and protect U.S. ambassadors abroad but increasingly used to file cases on foreign soil in U.S. courts likely to be more friendly to human-rights arguments.

Ramirez believes that there will be many more cases filed against U.S. companies as his team of lawyers dig deeper into alleged links to human rights abuses in the last five years that could ensnare oil companies Occidental, BP and Harken Energy, as well as Swiss trading company Glencore. All the companies deny any such links.

Andres Otero, managing director of corporate security company Kroll Worldwide's Colombian office, believes the peace process with the paramilitaries, which has seen 40,000 former combatants demobilize, will result in many companies following Chiquita's lead. "We are seeing the scandal of the paramilitaries today. In a few years we are going to see the scandal of the guerrilla. We are going to see a lot of companies that paid paramilitaries or guerrillas and they are all going to have to find some way to approach the Department of Justice," says Otero.

In many cases, firms operating in areas where the Colombian government was unable to offer any real protection from the paramilitary groups had little choice but to make the payments, says Otero. That excuse, however, holds little water with human rights groups in Europe and the United States. They are urging consumers to boycott companies with subsidiaries that have been linked to violence.

Drummond and Coca-Cola have been subject to pressure at home and abroad due to their Colombian affiliates. Most notably, state-owned power plants in Denmark have stopped importing coal from Colombia until Drummond's legal situation has been resolved. "Businesses are starting to learn that what happens behind my back is my fault," Otero says.

RAINBOW NELSON * CARTAGENA, COLOMBIA