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Embargoed until Thursday, November 21, A.M., 1996

Working for the Yankee Dollar:

The Honduran Republic of Chiquita

*Honduras--Latin America's Ultimate Banana Republic, Courtesy Chiquita.

*Stranger than fiction charges of bribery, armed assaults, abduction attempts, snatched documents, destroyed banana shipments, murder-for-hire-contracts, a disappearance of a corrupt judge and the likely emergence of another, and a tainted Supreme Court, placed at Chiquita's door.

*Chiquita's Carl Lindner, billionaire contributor to Democratic and Republican presidential candidates, promotes campaign to morally debase penniless nation, as he has done Washington.

*Integrity of Honduras' basic democratic institutions at stake. Is U.S. AID wasting its funds targeted on reform of the Honduran judiciary, which features one of the most corrupt supreme courts in Latin America?

*Chiquita-friendly U.S. consul grants vanishing visa to corrupt Honduran judge.

*Ongoing Honduran Chiquita scandal could exceed in notoriety the uproar surrounding the Kathie Lee Gifford-brand sweat shops, further humiliating the Central American nation. Texaco scandal dwarfed by L'Affaire Chiquita ten-times over.

*Negroponte's vermiculated legacy: already compromised U.S. embassy couldn't be less interested about justice.

Note: The Council on Hemispheric Affairs (COHA) has a complete set of documentation regarding Chiquita and the Stalinski case in its possession, including court writs and judgements, as well as a wide range of depositions, which is available to bona fide investigative journalists. These primary sources solidly, if not devastatingly, corroborate every contention made in this memorandum. There is every reason to believe that Chiquita's present highly compromised conduct in Honduras dwarfs by many times the ongoing controversy surrounding the Texaco Corporation, and caricatures the efforts of David Rockefeller and other reputable U.S. business leaders to develop a sense of corporate responsibility in the operation of U.S. businesses abroad. Chiquita's troubling role in Honduras deserves the merciless scrutiny that this memorandum hopefully, and in a small way, begins to provide. COHA is also readying a series of collateral initiatives to identify the full range of Chiquita Brands International's buckaroo behavior in Honduras and elsewhere in Latin America, and any privileged treatment that its CEO and heavy Clinton and Dole campaign donor, Carl Lindner, as well as other Chiquita officials may have improperly received from the U.S. embassy in Tegucigalpa, or in Washington's legislative and executive corridors.

Chiquita--Skullduggery Unlimited

Indisputable documentation now in the hands of the Council on Hemispheric Affairs (COHA), establishes that the Cincinnati-based banana giant, Chiquita Brands International, known throughout Central America as the "Octopus," has used virtual gangster tactics to eliminate the competing Anglo-Irish Fyffes Group Ltd. It also has bought off witnesses in order to give tainted testimony in Honduran courts, as well as harassed and threatened the life of Fyffes' former Honduran chief agent and general manager. Chiquita's target was German-born Otto Stalinski, a highly regarded and well established businessman and longtime resident of Honduras, who had spent the last 19 years of his life in Latin America engaged in a variety of successful commercial ventures. Chiquita's mission was to preserve its favored position as an entity above the law, so that its transgressions, no matter how deserving of censor, could continue with impunity, as it strived to maximize profits.

A trail stretching from the banana plantations of Honduras to the corridors of power in Washington, and featuring charges of attempted assassination, bribed judges, and wall-to-wall corruption--which long has been a lamentable fact of life in Honduras, one of Latin America's poorest nations--ends at the Cincinnati offices of Carl Lindner. The CEO of Chiquita Brand International, presides over a conglomerate worth an estimated $3 billion. In addition to bananas, its other assets include meat-packing plants, canneries, ice cream factories, and fresh vegetable operations. In fact, bananas currently provide only 50% of the total annual sales of Lindner's empire.

Nevertheless, when it comes to bananas, Lindner is king. Through its cultivation of low-cost, "dollar bananas" on large plantations on the mainland of Central and South America, Chiquita controls close to 70% of the world market. Its Honduran subsidiary, Tela Railroad Company, Inc., not only possesses 800,000 acres of land in that country, but has had an inordinate influence over its government, particularly during the corrupt Administration of Rafael Callejas (1988-1992), under which Chiquita's influence may have peaked, now that the reformist government of Carlos Reina holds office.

Lindner's philosophy and business ethic are remarkably similar to those behind the operations of Chiquita's progenitor, United Fruit, during its good old days in Guatemala. Hondurans now are beginning to realize that the harvest from Chiquita's presence may be as bitter as it was for their Central American neighbor under United Fruit. Like its parent, Chiquita has spent a lot of money in Washington buying influence, and when the time came to use it, it was at Lindner's disposal. As for Honduras, the Chiquita caudillo apparently sees the country as little more than his personal banana fiefdom where, for a price, everything is for sale.

At this moment, Honduras' very viability as a modern state deserving of inclusion into free trade groupings and consideration as a prospective environment for new foreign investment (particularly from the EU) is at stake. The question is whether President Reina will have the political courage to stand up to Chiquita, and in a determined manner, dislodge the existing, fatally-flawed judicial system with the same fortitude with which he has dealt with an armed forces far from sympathetic to civilian democracy. As the system stands, and with scores of developing economies competing for a limited number of overseas investors, few ethical corporations will be prepared to play Chiquita's tawdry kind of game. This is likely to cause Honduras to lose precious new flows of foreign exchange.

Fyffes will be leaving Honduras on January 1, 1997, having sold its operation to Dole for $26 million. Starting from scratch in Honduras in 1990, by 1995 it was shipping 7 million boxes of bananas annually to Europe (compared to Chiquita's 11 million boxes). Fyffes management decided to sell because it did not feel comfortable investing additional funds in a country in which its business rival, Chiquita, had such an arched political advantage, and had developed such craft and guile in manipulating the political setting to the disadvantage of its competition. Furthermore, Fyffes scheduled departure can also be attributed to its lack of confidence in the judicial system, or the country's ability to uphold the laws it had enacted.

Chiquita Plays Dirty Washington is currently spending tens of millions of dollars throughout Latin America attempting to reform notoriously corrupt judiciaries, in part to help U.S. investors know whether the ground rules are reliable before they bring in new capital. One of the countries desperately requiring such reform is Honduras, as is amply attested to by the experience of Otto Stalinski. A criminal lawsuit, filed in 1994 by him, alleges that on April 28, 1990, several uniformed and civilian-dressed men armed with automatic weapons, and accompanied by Chiquita attorney Leonel Medrano Irias, who still represents the company, tried to kidnap and probably assassinate the plaintiff, using a trumped-up arrest warrant as a cover for their planned death squad-style operation.

Chiquita officials later insisted that the company had a legitimate court order to arrest Stalinski on the grounds of banana theft, and that those who had come to the Hotel Sula in San Pedro Sula (the country's second largest city), where Stalinski was staying, were bona fide Honduran police who intended to legally detain him. But as a later court finding and a number of reputable sworn depositions have established, Stalinski never had done anything illegal, but was merely carrying out his contractual obligations as Fyffes' resident agent in Honduras, to purchase bananas from an independent and reliable source. An official representative of the city of San Pedro Sula's police confirmed at the time that there never had been a legal arrest order issued for Stalinski and that no one on the force had been authorized to arrest him at his hotel. Presumably, Lindner's thugs had struck again.

There is good reason to believe Stalinski's assertion that if the hotel personnel hadn't forewarned him that armed men were on their way up to his room, and if he hadn't manage a hair-raising escape through the hotel's basement, he would have been brutally assaulted at best, murdered at worst. Two depositions have since been filed by individuals who heard Chiquita agents discussing plans to abduct Stalinski, affirming his allegations that the armed group had been instructed, if need be, to eliminate him.

In October 1993, after the National party lost power to the reform-oriented Liberal party, and President Carlos Roberto Reina had assumed office, Judge Mario Matias Galindo, who originally had issued the doctored detention order against Stalinski on Chiquita's behalf, was charged by the new Government Attorney with fraud and malfeasance, and summarily suspended from the bench. In order to avoid prosecution, Galindo then decided to prepare to flee the country, which he did in early 1994, but not before he allegedly received a new automobile and a significant sum of cash. This information was later provided in a deposition by Jose Amilcar Orellana, who became a Chiquita hireling after the Third Court had taken the banana company's advice and appointed him as the court trustee on Stalinski's case. According to Amilcar Orellana, Galindo had previously complained to him that all of his good work for Chiquita had gone "unrenumerated," a situation that now had changed. The Chiquita case was only one of Galindo's numerous purported instances of misuse of office.

Stalinski's Odyssey In January, 1989, Fyffes Group Limited, a former subsidiary of Chiquita which had been sold off a number of years before, contracted Stalinski to identify independent suppliers of Honduran bananas which could be exported by its local subsidiary, Caribbean Gold. Stalinski secured an agreement with Compa?ia Agricola Ganadera de Sula, S.A. (CAGSSA), a former Chiquita supplier and one of the largest producers of bananas in Honduras, to purchase its crop. Under this new agreement, CAGSSA would receive $4.40 per box (40 pounds) in contrast to the $3.16 it had been getting from Chiquita. In addition, Fyffes offered to renegotiate the agreement annually, which CAGSSA's previous contract with Chiquita also allowed, but which it failed to carry out during the latter half of its term. The banana grower also had insisted that if an arrangement was to continue with Chiquita, it would have to revamp the previous bookkeeping system and a reconciliation of past accounts be undertaken, as well as payment of any of the annual price increases Chiquita had failed to honor.

For decades, Europe's supply of bananas has been controlled by U.S. multinational corporations led by United Fruit and then Chiquita, putting them in a monopoly position. In fact, Dole's and Del Monte's banana operations were created as a result of anti-trust action by the U.S. Department of Justice in order to break up the existing Chiquita monopoly. The charges in the Stalinski case, if upheld, would appear to make Chiquita a prime candidate to be revisited by the Justice Department's Anti-Trust Division, regarding the banana company's prima facie unlawful efforts to destroy its competitor, Fyffes.

For Fyffes and its Honduran subsidiary, Caribbean Gold, it was critical, in order to satisfy its European market share, to obtain its own independent source of supplies, thereby explaining the importance of Stalinski's task. The so-called "banana war" erupted in 1990, when Chiquita, infuriated by CAGSSA's deal with Fyffes, obtained, through the grace of Judge Galindo--who was fast becoming a virtual Chiquita functionary--a fraudulent warrant claiming that the bananas being shipped by Fyffes actually belonged to Chiquita (because of a later-invalidated claim that Chiquita had made against CAGSSA for allegedly having defaulted on mortgage payments to the banana giant). Backed by the spurious documentation and on numerous occasions, accompanied by Judge Galindo and Amilcar Orellana (both of whom were armed), Chiquita management, on a weekly basis, ordered its goon squads to systematically board the vessels that had been contracted from March through June 1990, by Fyffes and destroy or confiscate for its own profit, the bananas on board or at dockside. This cost CAGSSA a total of 300,000 boxes--even after CAGSSA had settled its account with Chiquita by paying it the contrived debt of U.S. $1 million (4 million Lempiras at the 1990 exchange rate).

Chiquita's unrestrained campaign of dirty tricks was aimed at badgering CAGSSA, harassing Stalinski, and dissuading Fyffes from remaining in the Honduran market. Even after Judge Galindo's court order had been vacated, Chiquita continued for almost two months to destroy Fyffes' bananas. Finally, under pressure from the then-European Economic Commission (EEC), then-president Rafael Callejas, who was later accused of defalcating upwards of $50 million dollars (200 million Lempiras) from a special government petroleum account, forced an end to the banana war on June 8, 1990. In a confidential agreement between the government and all parties involved, Chiquita agreed to repay Galindo's tainted U.S. $1 million judgement against CAGSSA. For its part, the government promised to compensate CAGSSA for some of the damage done to the 300,000 boxes of bananas destroyed by Chiquita's squads. Fyffes suffered an estimated $10 million in operational damages, as a result of Chiquita's actions against CAGSSA, for which it received no compensation. A key provision of the pact was that all pending lawsuits and legal claims would be dropped. It should be noted that Stalinski was not invited to the meeting nor was he a party to the agreement.

Chiquita's Wish List What Chiquita most wanted from its broadening largesse to Washington politicians was to achieve the abrogation of the Lome Convention and 1994 Framework Agreement, under which high-cost bananas produced in former French and British colonies had been given a modest 8% to 10% entrance quota to the EU market. After the Clinton administration took up Lindner's cause and petitioned the World Trade Organization (WTO) to order the EU to cancel its privileged treatment of Caribbean exports, CARICOM attempted to present its case to an indifferent Washington. Throughout this debate, the White House and Congress appeared to exhibit a surprising and short-sighted lack of concern for the plight of the Caribbean island nations, which not only could jeopardize the economic survival of some of CARICOM's more vulnerable members, such as Dominica and St. Lucia, but also could produce sizable negative reverberations in the U.S. Ambassador Joseph Edmunds of St. Lucia noted, in a recent interview in COHA's biweekly publication, the "Washington Report on the Hemisphere," that, "Chiquita virtually has declared war on the Caribbean. This is unacceptable." But Washington's pro-Chiquita stand merely may have been a matter of expressing its bipartisan gratitude to Lindner for his generosity.

The Caribbean's tiny, strongly unionized island nations feature fragile economies based on narrow export sectors burdened by high-cost banana cultivation methods and relatively high labor costs. Consequently, they find themselves in a losing battle against cheap "dollar bananas" shipped from Central and South America, where often harsh working and living conditions are the result of low wage levels and the depressed wholesale purchase prices offered by major U.S. banana distributors like Chiquita. For example, for the 1989-1991 period, Chiquita shipped 40 pound boxes of bananas to U.S. and European ports of entry at a F.O.B. cost of $5.00, which eventually sold for at least $13.00 in the U.S. and up to $20.00 in Europe. The current value of these boxes on the U.S. retail market is now closer to $20.00. Conditions back at the production site which allow for such huge profit margins often parallel the sweat shop horrors found in Honduran garment factories that have been featured in the Kathie Lee Gifford-brand controversy. Some foreign observers are quick to note that the Honduran government could find itself as much embarrassed and humiliated by the Chiquita scandal as it was by the flap over its controversial garment manufacturing sector.

The driving force behind the White House's combative trade policy can be easily divined by observing Chiquita's recent activities, since not one pound of bananas or even one U.S. worker is involved in domestic banana cultivation, thus denying the White House any pretext that its stand is in defense of the national interest. The WTO appeal was instigated at Lindner's request. Chiquita officials insisted that the Caribbean quota needed to be ended because it was costing the U.S. company dearly. In fact, Chiquita's stock had skidded from 50 to 12 ? in recent years. In 1994, the corporation had a net loss of roughly $65 million and since then the banana czar zealously has lobbied Washington, maintaining that the EU's special arrangement with the Caribbean exporters grievously had damaged Chiquita in the European market. Interestingly, the company had net losses in the hundreds of millions in the early 90's, several years before the Caribbean-EU Framework agreement was even approved. Even though the EU consequently enlarged the quota for "dollar bananas" to an enormous 70.5% of its entire market, and the Lome agreement favoring Caribbean growers had only a few more years to run, this was not enough to appease Lindner's insatiable greed, but did allow him to contrive a superficial explanation and good "cover" to worried stockholders as to why the company was doing so poorly under his leadership.

Bringing in the Big Guns By the early 1990's, Lindner was not only a major campaign contributor to both U.S. political parties, but to ranking legislative leaders as well, including Senator Dole, Congressman Richard Gephardt (D-MO), and Senator John Glenn (D-OH). Thus, he was able to generate an impressive degree of self-serving political leverage in Washington on both sides of the aisle. In 1994, Lindner was the second largest benefactor of "soft money" to national political campaigns, with $525,000 donated to Democrats and $430,000 to Republicans. He reportedly has given at least as much since. If Lindner's Honduran executives weren't doing a good job in reporting back to him the full scale of his dangerous tactics, he could have read about them in his hometown paper last December, when Jeff Harrington of The Cincinnati Enquirer ran a story on Stalinksi's plight.

Secretary of Commerce Mickey Kantor (formerly the U.S. Trade Representative) and Republican presidential nominee Bob Dole energetically took on Chiquita's cause against the existing EU-CARICOM arrangement. While both deny that Lindner's financial transfusions in any way influenced them, a remarkable convergence of interest seems to have taken place on the banana issue, all in Chiquita's favor, and leading lights in both political parties continue to work toward trying to dismantle CARICOM's quota arrangement. Interestingly enough, neither Dole nor Del Monte--the other two U.S. distributors--have signed on to the WTO complaint, and Honduras did so only after being strong-armed by Chiquita.

CARICOM appealed directly to President Clinton for an equitable solution to the quota question, but the White House has given no indication of wishing to drop the complaint, which will probably be ruled on by the WTO in January. On July 9, two days after CARICOM's Heads of Government meeting had concluded, Washington gave its final assent for the WTO empaneling process to go forward.

As Senate majority leader, Bob Dole had employed a variety of legislative tactics (including repeatedly attaching pro-Chiquita amendments as riders to other bills) in an unsuccessful attempt to punish Costa Rica and Colombia (the top two banana exporters to the U.S. domestic market) for not cooperating with the Chiquita-initiated WTO complaint filed by the U.S., and for signing onto the "Framework Agreement." In return for his indefatigable special interest legislative activity on Chiquita's behalf, Dole had the unrestricted use of Lindner's private jet, which facilitated his travel plans during the presidential primaries prior to the November 1996 elections.

While Lindner's battery of lawyers were arguing that his anti-CARICOM battle was good for America, Marine General John Sheehan, Commander of the U.S. forces in the Atlantic and Caribbean, was expressing a dissenting point of view. Sheehan vigorously vented the belief that U.S. banana policy could have deleterious effects on this country. Drug enforcement officials argue that as much as 40% of the cocaine presently bound for this country (about 200,000 kilograms per year) is shipped through the Caribbean. Sheehan fears that as small, independent and family-centered banana growers in the Eastern Caribbean continue to lose market share and face imminent financial disaster, some might be lured into drug trafficking. Moreover, the area's domestic politics could be increasingly corrupted by the expanding drug cartels, as is now being seen in Antigua, and has been previously experienced throughout Central America, including Panama. Financial hardship, sharpened by a record twenty-year low in banana prices last winter (at a time when the fruit was selling at very high prices in U.S. supermarkets) helped drive at least 4,000 illegal immigrants to the U.S. from these densely populated islands, adding to the already large number of illegal migrants from there already in this country. With nearly 50% of the work force presently involved in the banana industry on islands like St. Lucia and Dominica, and the threat of significant shrinkage from the 60% of their export income now coming from bananas, illegal immigration and drug transshipments are the likely consequences.

Judge Reyes Falsifies Documents Having been the victim of Honduran justice and its behind-the-scenes tableau of payoffs, bribes and tamperings, new acts of chicanery shouldn't have come as a complete surprise to Stalinski. However, the German entrepreneur was almost caught off guard when on October 25,1996, his astonished attorney, Saul Mu?oz Orellana, discovered that Judge Linda Patricia Reyes of the Third Criminal Court of San Pedro Sula, who previously had been a rare model of judicial rectitude in Honduras' otherwise stygian judicial system, apparently had ordered the illegal backdating of vital court documents pertaining to his lawsuit against Chiquita's senior management. Evidently, she couldn't resist Chiquita's golden shine. Yet, she is still sitting on the bench, although reportedly under investigation, while quizzical Honduran Bar members await some form of appropriate administrative action against her highly dubious activities.

Mu?oz Orellana had discovered that the court had found Karl Friedrick Koch, the chief executive of Chiquita's Honduran operations, who along with his colleagues, had been accused by Stalinski in his court case of authorizing somewhat unorthodox business practices--including would-be murder threats that were being initiated against both Stalinski and his lawyer--"exempted and held harmless of all guilt." Stalinski's attorney was astonished when he saw that the dismissal had been backdated and filed by Judge Reyes, who had no standing in this particular aspect of the proceedings. Upon inquiring, Mu?oz Orellana was told by a court secretary that, in fact, it was Reyes who had ordered the totally unwarranted entering of a dismissal against Koch, who was found innocent on October 24, 1996. She had instructed the secretary to backdate the document to September 20, 1996. The scandalous falsification of the date was critical in that, under Honduran law, it would have involuntarily terminated Stalinski's criminal case against the Chiquita official in favor of the fruit giant, since her action would have caused Stalinski's lawyer to have missed the fixed three-day filing period deadline for appealing the ruling, permanently aborting his case. The issue is now under appeal.