SEC v. Chiquita Brands (FCPA)

Case 1:01-cv-02079-JR Document 1 Filed 10/03/01 Page 1 of 6
UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF COLUMBIA
SECURITIES AND EXCHANGE COMMISSION

450 Fifth Street N.W.
Washington, D.C. 20549,
Defendant.
COMPLAINT
Plaintiff Se@uities and Exchange Commission (Commission) alleges that: ~

I
SUMMARY
1. Chiquita Brands International, Inc., a New York Stock Exchange-listed company
headquartered in Cincinnati, violated the internal accounting controls andbooks and records
provisions of the Exchange Act in 1996 and 1997 as a result of the conduct of its Colombian
subsidiary, Bantidex. In 1995 and 1996, without the knowledge or consent of any.Chiquita
employees within the United States and in contravention of Chiquitas policies, Banadexs chief
administrative officer authorized the payment of the equivalent of approximately $30,000 to local
officials to secure renewal of a license allowing Banadex to ,hold goods for customs inspection or
nationalization at its Turbo, Colombia port facility. The payment was not properly recorded in
I
,,~Banadex; books and records, which are part of Chiquitas books and records. In 1997,
Chiquitas internal audit staff discovered the payment during an audit review and; after an
internal investigation, Chiquita took corrective action which included terminating the responsible
Banadex employees and reinforcing internal controls at its Colombian operations.,
.lURISDICTION
2. This Court has junsdiction pursuant to Sections 21(d)(3) and 27 of the Securities
Exchange Act of 1934 (Exchange Act), 15 U.S.C. @ 7&(d)(3) and 78aa.
DEFENDANT
3. Chiquita Brands International, Inc. (Chiquita) is a New Jersey corporation with
its headquarters in Cincinnati, Ohio. The common stock of Chiquita is registered with the
Commission pursuant to Section 12(b) ofthe Exchange Act and is listed on the New York Stock
Exchange.
OTHER RELEVANT ENTITIES AND PERSONS
4. C.I. Bananas de Exportation S.A. (Banadex) is an indirect wholly-owned
subsidiary of Chiquita with its headquarters in Medellin, Colombia. Banadex indirectly reports
to Chiquita.
5. Comercio Exterior Asesores Limitada (CEA) is a Colombian entity licensed by
the Colombian government to act as an intermediary between corporations and Colombian customs
0tIicials.
FACTUAL ALLEGATIONS
6. Chiquitas Colombian operations consist of, among other things, a number of
banana farms located throughout,the country and an import/exportport facilitylocated in Turbo.

The Turbo port facility is owned and operated by Banadex, an indirect wholly-owned subsidiary
of Chiquita.
7. Begimring in 1993, the Colombian government licensed the Turbo facility as a
location where goods could be stored pending inspection by customs officials.
8. In 1995, the Colombian government issued a decree requiring all current license
holders to submit renewal applications. Bauadex learned of the decree through CBA, its
intermediary with Colombian customs. Under Colombian law, companies are required to retain
licensed customs brokers who interact with customs officials on behalf of the company.
9. In September 1995, the Banadex employee in charge of material and supplies
advised Banadex management that renewal of the port facilitys customs license was in jeopardy
because of two previous citations for failure to comply with Colombian customs regulations.
The employee further advised management that replacing the Turbo facility would cost
approximately $1 million.
10. Without~the knowledge or consent of any Chiquita employee and in contravention
of Chiquitas policies, Banadexs chief administrative officer authorized Banadexs CEA agent
to make a payment to Colombian customs officials to obtain the license renewal. The chief
administrative officer directed Banadexs security officer and controller to make and process the
payment.
11. Banadexs CEA agent later advised the company that for the Colombian peso
equivalent of approximately $3Q,OOO the citations would be overlooked and the license renewal
granted. Banadex agreed to pay two installments - approximately $18,000 in advance and the
3
remainder after renewal. Both installments were paid by Banadexs sectity officer fr0rn.a
Bauadex account used for discretionary expenses.
12. The initial installment was incorrectly identified in the companys books and
records as a maritime donation (Donation Maritima3. The second installment was incorrectly
identified as relating to a maritime agreement (Acuerdo Maritima). Banadex did not request
permission from, or otherwise inform, any Chiquita employee within the United States regarding
the transaction.
13. Chiquitas policies and proceduresjcontain strict guidelines regarding the use of a
discretionary expenses account. Banadex did not comply with Chiquitas protedure requiring
that Banadexs books and records accurately reflect the transaction.
14. During 1996, Chiquitas internal auditing staff made management aware of a
number of instances in which Banadex had not provided documentation required by Chiquitas
internal accounting control procedures regarding discretionary expenses.
15. Chiquita had strict policies prohibiting payments of the kind made to the customs
officials. To monitor and enforce those policies, Chiquita required quarterly identification and.
disclosure of all payments to government officials or employees, political candidates, or political
parties. Contrary to Chiquitas established procedure, Bauadex employees failed to identify and
disclose the payment to customs officials on the disclosure forms submitted for the relevant
quarters.
16. In April 1997, Chiquita internal audit discovered the September 1996 payment
during an audit review of Banadex. After conducting an internal investigation, Chiquita took
4
corrective action, which mcluded terminating the responsible Banadex employee% and
reinforcing its internal controls with respect to its Colombian operations.
CAUSE OF ACTION
Violation of Section 13(b)(Z)(A) and (B)

of the Exchange Act
17. Plaintiff realleges and incorporates by reference paragraphs 1 through 17 above.
18. Sections 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act, the books and records
and internal accounting controls provisions of the Foreign Corrupt Practices Act, require
reporting companies to make and ~keep books, records, and accounts, which, in reasonable detail,
accurately and fairly reflect their transactions and disposition of assets, and to devise and
maintain a reasonable system of internal accounting controls. [ 15 ~U.S.C. $5 78m(b)(2)(A) and
(B).] Such companies are also responsible for ensuring that their wholly-owned foreign
subsidiaries comply with Sections 13(b)(2)(A) and 13(b)(2)(B).
19. Banadex employees made inaccurate entries in the documents recording the
transaction and Banadexs general ledger to conceal the payment to customs officials. These
inaccurate entries by Banadex constitute a violation by Chiquita of Section 13(b)(2)(A) for
failing to maintain books and records which accurately reflected Banadexs transactions and
dispositions of assets.
21. Chiquita violated Section 13@)(2)(B) by failing to maintain a system of internal
accounting controls to ensure that Banadexs books and records accurately and fairly reflected
the disposition of Banadexs assets.

PFQ4YER FOR RELIEF
WHEREFORE, plaintiff Commission respectfklly requests that this Court enter a Final
Judgment ordering Chiquita to~pay a civil penalty pursuant to Section 21(d)(3) of the E&iange
Act.
RespectfUlly s u b m i t t e d ,
&HgL-y+h
Linda,Chatman Thomsen (D.C. Bar. No. 334219)
Gregory S. Bmch (D.C. Bar. No. 413527) J
Gerald T. Balacek
Attorneys for Plaintiff
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, 0.C. 20549-0708
(202) 942-4732
Dated: October 2,200l

SEC v. Chiquita Brands (FCPA)

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Case 1:01-cv-02079-JR Document 1 Filed 10/03/01 Page 1 of 6

UNITED STATES DISTRICT COURT

SECURITIES AND EXCHANGE COMMISSION

Plaintiff Se@uities and Exchange Commission (Commission) alleges that: ~

1. Chiquita Brands International, Inc., a New York Stock Exchange-listed company

Banadex employees and reinforcing internal controls at its Colombian operations.,

Exchange Act of 1934 (Exchange Act), 15 U.S.C. @ 7&(d)(3) and 78aa.

3. Chiquita Brands International, Inc. (Chiquita) is a New Jersey corporation with

OTHER RELEVANT ENTITIES AND PERSONS

4. C.I. Bananas de Exportation S.A. (Banadex) is an indirect wholly-owned

5. Comercio Exterior Asesores Limitada (CEA) is a Colombian entity licensed by

6. Chiquitas Colombian operations consist of, among other things, a number of

banana farms located throughout,the country and an import/exportport facilitylocated in Turbo.

7. Begimring in 1993, the Colombian government licensed the Turbo facility as a

location where goods could be stored pending inspection by customs officials.

9. In September 1995, the Banadex employee in charge of material and supplies

10. Without~the knowledge or consent of any Chiquita employee and in contravention

Bauadex account used for discretionary expenses.

that Banadexs books and records accurately reflect the transaction.

internal accounting control procedures regarding discretionary expenses.

disclosure of all payments to government officials or employees, political candidates, or political

reinforcing its internal controls with respect to its Colombian operations.

Violation of Section 13(b)(Z)(A) and (B)

17. Plaintiff realleges and incorporates by reference paragraphs 1 through 17 above.

maintain a reasonable system of internal accounting controls. [ 15 ~U.S.C. $5 78m(b)(2)(A) and

subsidiaries comply with Sections 13(b)(2)(A) and 13(b)(2)(B).

inaccurate entries by Banadex constitute a violation by Chiquita of Section 13(b)(2)(A) for

21. Chiquita violated Section 13@)(2)(B) by failing to maintain a system of internal

the disposition of Banadexs assets.

PFQ4YER FOR RELIEF

Dated: October 2,200l

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