March 14 (Bloomberg) -- Chiquita Brands International Inc., owner of the namesake banana brand, agreed to plead guilty to federal charges of doing business with terrorist groups in Colombia, in violation of federal law.

Prosecutors said Cincinnati-based Chiquita and eight unnamed company executives did business with United Self Defense Forces of Colombia, a ``violent, right wing'' organization designated as a terrorist group by the U.S. State Department in 2001, according to criminal charges filed today in a Washington federal court.

Chiquita paid the group more than $1.7 million in at least 100 installments between 1997 and 2004, according to the charging documents. Payments continued even after the company was notified that the group was a designated terrorist organization, and after company lawyers warned Chiquita ``must stop payments.''

``The company will plead guilty to one count of engaging in transactions with a specially designated global terrorist, and will pay a fine of $25 million, payable in five equal annual installments, with interest,'' Chiquita said in a filing today with the Securities and Exchange Commission.

A plea hearing has been set for March 19 before U.S. District Judge Royce Lamberth in Washington.

Activities of the paramilitary group, known as the AUC, included assassinations, kidnappings and murder of civilians in Colombia, where Chiquita had banana producing operations, prosecutors said. The company, which sold its Colombia banana business to Invesmar Ltd. for $51.5 million in 2004, also made payments to ``left-wing'' terrorist groups in the country, including the Revolutionary Armed Forced of Columbia, or FARC.

Protection Money

Chiquita ``will continue to cooperate with the government in any continuing investigation into the matter,'' the company said in the SEC statement. Chiquita said it recorded a reserve in 2006 of the entire $25 million designated for the fine, in anticipation of reaching a settlement with the government.

The company said in May 2004 that the U.S. was investigating the role of its Colombian subsidiary in making payments to groups identified as foreign terrorists. The unit paid ``protection'' money to ensure worker safety, Chiquita said at the time, adding that it informed the U.S. of the payments in April 2003.

``The payments made by the company were always motivated by our good faith concern for the safety of our employees,'' Chiquita said in a separate statement today.

Colombian insurgents routinely extorted companies and wealthy individuals to raise funds to finance a four-decade fight against the government.

Private Armies

Paramilitary groups, which began in the early 1980s as private armies for landowners, often got money from businessmen in exchange for security against rebel kidnappings, extortion and murders.

Chiquita said it sought the Justice Department's guidance three years ago when it became aware the groups it dealt with had been designated as foreign terrorist organizations under a U.S. statute that makes it a crime to support such an organization.

Shares of Chiquita rose 25 cents, or 2 percent, to $12.74 in composite trading on the New York Stock Exchange. They have lost a fifth of their value this year, leaving the company with a market value of $540 million.

The case is U.S. v. Chiquita, 07-55, U.S. District Court in the District of Columbia (Washington).

To contact the reporter on this story: Cary O'Reilly in Washington at caryoreilly@bloomberg.net

Last Updated: March 14, 2007 19:14 EDT