- Chiquita Brands International • - - M- ORANDUM ·· '• ' _ HIGHLY CONFIDENTIAL • PRIVI_LEGE T-ATTORNEY INFORMATION DATE SUBJECT Reportable Payments in Colombia and Manager's Expense Payments This memo documents my understanding of the Turbo and Santa Marta Divisions' ·transactions that are reportable on the Statement of Policies and Procedures and Manager's Expense summaries Also I will include my understanding of the Divisions' handling and reporting of payments for security purposes and payments to the respective trade association This information is based on inquiries oflocal Management and through my observation of documents that were made available to me This memo with attachments wilJ·constitute our working papers related to this area Our professional s'iaodatds x eq uirG that me documenflli ' v that we perform € P 7 flL We limited the scope of our testing and the related procedures performed to disbursements and certain corporate compliance areas 'This was the fi1st lmernal audit 10 iew at tfie leeatien in approximately ten years Our work primarily consisted of a disbursement sample review·of policies and procedures and discussions with management since this engagement ·constitutes a disbursement review We did not perform detailed substantive testing of balance sheet values and compliance testing beyond the disbursement-related systems Had we perfonned additional procedures or had we performed a complete audit of each of the aforementioned entities other matters may have come to our attention that would have been report_ed in this memorandum and detailed in 'the reiated workin Statement of Policies arid Procedures Disclosures 7 ased on discussions I had with each of the General Managers at both of the Divisions th only reportable transactions to governments governmental agencies governmental employees political parties or political candidates that they were aware of are the donations totalling $1 441 at Turbo and $444 at Santa Marta for·the period January I 1993 through October 25 1993 as outlined in Exhibit I I noted no other reportable transactions from my review of the entity I discussed the nature of reportable payments with them They seem to better understand and committed to properly re ort t h pents a that constitute a reP ortabJe transaction Y t J t - 1 _ Jy _ lf7v rVF-TI'- JtJ- P t s e · 1-s 0- 1 L'2W s • I understand based on my discussionS' with Management and based on my review of documents CBI-V1-003-000281 CHIQUITA NSD 6446 - • HIGHLy c·oNFIDENTIAL - PRIVILEGED CLIENT-ATTORNEY INFORMATION Memorandum t January 4 1994 Page 2 sq Management made available to me that the Manager's Expense Account at both Divisions largely consists of guerilla extortion payments made by the Security Department through our intennediary or Security Con ultant Rene Osorio I understand that the Security Consultant is our contact with the various guerrilla groups in both Divisions Management in Santa Marta advised me that all extortion payments referred to as citizen securi b Mana ement are currently handled through the Security Department eithe in Medellin and recorded in the respective Division's accountmg recor s ID an account named Gastos de Seguridad Ciudadana I understand that these payments are not suworted by any receipt by any outside recipient and are being expended as a Company expense Totals of such payments were $HOM at Turbo and $3M at Santa marta for the period January 1 1993 through October 25 1993 These amounts have been expensed via the Manager's Expense Account in 1993 The Turbo General Manager told me that the Guerilla Groups are used to supply security personnel at the various farms This is nm practiced at the Santa Marta Division Through October 1993 the Divisions are in a loss position for financial and tax purposes of S2 3 million for Turbo and $6 1 million for Santa Marta Therefore local Management is not very · concerned that they are expensing these payments without supporting documentation Management believes that the loss situation the divisions are experiencing would mitigate the lack of documentation for the payments in the event that ·the Divisions arc audited by local tax t orities 1 ve t at l have included schedules Exhibits II through IV of the manager's expense accounts for both divisions for the period January through October 1993 I have agreed these to the general ledger activity and noted only two differences with a zero net effect Both of the differences were at -onEXIDlntll @Both Divi ion belong to trade associations that re resent the respective_areas in promoting the region's bananas in improving the general infrastructure and coordinating the facilitation of government services and promoting overall safety in the region The involvement in and CBI-V1-003-000282 CHIQUJTA NSD 6447 - f HIGHLY CONFIDENTIAL - PRIVILEGED CLIENT-ATTORNEY INFORMATION Memorandum t January 4 1994 Page 3 influence over the association- varies by Division The Turbo Division appears to have some influence over their respective trade association AUGURA Management receives a budget and certain transaction details such as information relating to facilitating payments and donations to the various entities Whereas the Santa Marta Division receives no such transaction infonnation or budgets from its regional trade association FUNDEBAN Due to the influence and knowledge factors the Turbo Division reports the governmental-related AUGURA payments made by the trade association on its quarterly Statement of Policy and Procedure disclosure these started third quarter 1993 while the Santa Marta Division dces iot report governmental-related FUNDEBAN payments on its quarterly disclosure The trade associations assess the Di isions $0 02 per box of exported fruit The Divisions pay for both produced and associate producer-purchased fruit Amounts assessed by such associations for the period January I 1993 through October 25 1993 were approximately $106M at Tu 3M at Santa Marta I In the event that you should have questions or comments regarding the aforementioned areas please feel free to contact me attachments CSI-V1-003-000283 CHIQUITA NSD 6448