so you think your compliance budget isn’t big … you...so you think your compliance budget...

So You Think Your ComplianceBudget Isn’t Big Enough?

Creative Implementation of Programs When You Wish You Had More to Spend

Barbara WagnerAssociate General Counsel and

Assistant SecretaryFormer Chief Compliance Officer

Chiquita Brands International, Inc.September 12, 2006

Society of Corporate Compliance and Ethics2006 Compliance & Ethics Institute September 12, 2006 2

Chiquita: A Global, Diversified Company

Fresh Cut24%

Fresh Select31%

Other1%

Bananas44%

Premier global brand

Strong market position

$4+ billion in sales in 70+ countries

25,000 employees

Production, distribution, marketing

Sales by Segment2005 Pro Forma with Fresh Express


A truly global company

MARKETSMAIN PRODUCERS


25,000 Employees

Latin America 17,000Europe

3,500

North America

4,500 Costa Rica 4,000

Honduras 4,000

Panama 4,000

Chile 3,000

Guatemala 2,000


Separate Departments – but NOT silos

Legal

Compliance

CorporateResponsibility

ERMInternal

Audit

HR

Finance


Compliance and Ethics at Chiquita

Corporate ResponsibilityOfficer/Steering Committee

Steering Committee created 1998; CR officer 2000Reinforce and promote a culture of ethical and legal compliance to ensure that corporate responsibility is integrated into the everyday way we do business at Chiquita Focus on social, environmental, and ethical responsibilities, beyond minimum legal standards, in our Core Values and Code of Conduct

Chief Compliance Officer

Position created 2005; full time 2006Oversee the Company’s programs to ensure full legal complianceFocus on legal responsibilities in the Code of Conduct and oversight of implementation by operating units and functions of laws and compliance-related company policies


Implementation of Compliance at Chiquita

LegalDepartment

HumanResources

EmployeeCommunications

Corporate Responsibility ERM

BusinessUnits

Tax

ControllersInternalAudit

Compliance

Treasury

Yellow

Light Green

Blue

Auditing

Training

Oversight and

Implementation

- Laws & Policies

CommunicationsCo

de o

f Con

duct

,Va

lues

, Tho

ught

Lead

ersh

ip

Assessment

Methodology

Finan

cial R

epor

ting

Policies

and

Controls

Food

Saf

ety

Import/Export

Environmental

Implementation

and HR Policies

Financial Contro

ls

and Polic

ies

Tax and

Customs Compliance

Labeling

= Operations

= Functional Groups withcompliance component

= Assist with Compliance Mission Investigations


Timeline of Key Corporate Responsibility Events

1992 2002

2001

2000 2003

CERES-ACCA Sustainability Reporting Award

SAI AdvisoryBoard

SAI Corporate Conscience Award

SA8000 in Colombia and Panama

EurepGAP in Colombia, Panama and Costa Rica

2004

Code of Conduct(SA8000)

CR Officer

1st internal audits

100% RA Certification

IUF / COLSIBA Agreement

1st CR Report

2nd internal audit with observers

ETI member

Worker training

Top 20 Sustainable Stock Picks (SB20)

SA8000 in Costa Rica

BSR Board

RainforestAllianceEngagement

OAS Corporate Citizen of the Americas Award

100% SA8000 certification1998

2005

100% EurepGAP certification

KLD’s Domini 400 Social Index

Chiquita / RA campaign in Europe

WWF Agreement on Mesoamerican Reef

Italian Ethic Award; Swiss Ethics Finalist

Steering CommitteeCreated

1999

Core Values

3rd-party pilot audits


Example 1: Corporate ResponsibilityPartnering with Compliance

Agricultural Production (bananas) primarily in Latin America

Local environmental standards not as stringent as legal requirements in major markets (U.S. & Europe)

Comply with minimum legal standards in countries where products are marketed

Create higher standards and apply consistently



Rainforest Alliance – Better Banana Project

Early 1990’s – began looking for appropriate partners

1992 – established relationship with Rainforest Alliance

Throughout 1990’s - draft, investigate, refine and adopt standards

2000 – 100% RA certification for owned farms

Adopt other third party standards: SA8000, EUREPGAP



93%

100%

49%

57%

91%

82%

100%

94%

100%

100%

100%

100%

100%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Total

Panama

Nicaragua*

Honduras

Guatemala

Ecuador*

Costa Rica

Colombia*

Purchased Fruit Owned Production

Percentage of Total Farm Area Certified, December 2005

* Chiquita does not own farms in Colombia, Ecuador or Nicaragua.



Implement with suppliers

Who: Production experts, local environmental coordinators and operations personnel, corporate communications, one lawyer – strong support from CEO and business unit heads

Takeaway: It takes time to achieve credibility with third parties


Example 2: Adoption and Implementation ofInternational Trade Policy

The Office of Foreign Assets Control (OFAC) administers and enforces economic sanction programs primarily against countries and groups of individuals, such as terrorists and narcotics traffickers.All US persons must comply (including persons and entities within the U.S., all U.S. incorporated entities and their foreign branches). Fines for violations can be substantial. Entities comply with OFAC regulations by ensuring that vendors, customers, and vendor’s banks names are not on the Specially Designated Nationals and Blocked Persons (SDN) list. The list is updated periodically.



Committee was formed at Chiquita in November 2004, with members from the Accounting, Treasury, IT, Legal, and Internal Audit departments. Goals included:

1. Develop an international trade compliance policy (with emphasis on OFAC);

2. Evaluate and choose an appropriate software or compliance tool that assists in screening vendors, customers and banks.

3. Refine the A/P and A/R policies to incorporate any OFAC concepts.

4. Develop operational procedures to ensure compliance.

Committee initially identified four vendor solutions that best met the Denied Party Screening (DPS) project requirements. Vendor presentations in April 2005


Example 2: Adoption and Implementation ofInternational Trade Policy (continued)

Final selection, based on ability to:Perform scheduled automated denied party screenings (DPS) on Chiquita’s payment systems.Permit manual customer, supplier, and vendor record screening via website.Match entries to the government’s SDN list regardless of international spelling differences.Notify all appropriate Chiquita employees via email of the screening results.Provide audit and activity reports in both paper and electronic formats.Minimize the performance impact to Chiquita’s various payment systems caused by scanning customer, supplier, and vendor records. Conform to Chiquita’s IT environment requirements.

Determined that proper department to sponsor the contract with the vendor was the Controller’s department since A/P is an accounting function.



Policy adopted September 2005Policy covers:

U.S. anti-terrorism laws, most notably OFACU.S. trade restrictions and sanctions U.S. anti-boycott regulations andOther similar laws in other jurisdictions

Test run of entire A/P list, September 2005; live, regular screening implemented October 2005.Controller’s and finance departments have the most interface in implementing the system and addressing “matches” or “potential matches.” Internal Audit reviews results.Quarterly certification by manager-level employeesTakeaway: Define critically where lawyers can add value.


Example 3: Code of Conduct Training

Fully revised Code of Conduct introduced 2000Based on SA8000Additional legal and ethical responsibilities

Original training involved eight hours live training in selected business unitsNever fully rolled out to all employees (20,000 at the time), but broad instruction, including illustrated booklet for agricultural workers



Certification to “legal and ethical responsibilities” in Code of Conduct commenced 2003

Initially all managers (approx 750)Expected to read Code and Code-related policiesIncludes certification relating to Conflicts of Interest

Law Department reviews any disclosed conflicts or potential conflicts and clears with appropriate business unit supervisorsInternal Audit department audits both conflicts and code certificationCertification converted to online process in 2005



Decision to broaden certification to “all employees who work in an office” in 2006 (approximately 5000)Wanted to include training before they certified – on the Code, Core Values and code-related policies – in six languagesReviewed many products offered by different vendors, including our online compliance trainingHad used a vendor in Costa Rica to prepare some HR and IT training, and decided to have them prepare courseHR Training manager supervised preparation of course



Primary content review byManager, corporate responsibility, and other steering committee membersChief Compliance Officer, and other lawyersEmployee Communications

Additional review by HR, legal, operating units, other corporate responsibility steering committee membersSignificant involvement by IT to implement, including code certification



Training is 1 ½-2 hours; online (for everyone with email address); available in 6 languagesIncludes testingCertification carried out in a separate online process, approx. 2 weeks after completion of training.Takeaway: Prioritize where it makes most sense to create a customized product, versus tailoring a generic product


Example 4: Use of Internal Audit in Compliance

Department has staff of 20Language facility (esp Spanish)Frequent visits to various operations - know the business and know the problemsBroadening scope of responsibilities since SOXCoordinate closely with corporate responsibility audits and assessments


Example 4: Use of Internal Audit in Compliance

Examples of value-added services in compliance areaHotline investigations – both financial related and othersExpand scope of selected audits to include legal and regulatory complianceContribute to development of training content on policy and compliance matters Ensure compliance matters are explicitly taken into account in Internal Audit planning and risk assessment processesFully train all Internal Audit staff on compliance matters so they can be alert to issues that may come to their attention during any fieldwork

Compliance issues may inform risk-based priorities in audit planCoordinate closely with corporate responsibility audits and assessmentsTakeaway: Be creative in using available resources


Other quick examples

Online training on antitrust and EU competition law

Locations database for hotline

ERM assessment


Final takeaways:

5 It takes a long time to achieve credibility with third parties

4 Define critically where lawyers can add value3 Prioritize where it makes most sense to create a

customized product, versus tailoring a generic product

2 Be creative in using available resources1 A small handful of motivated individuals who

cooperate can accomplish a lot

so you think your compliance budget isn’t big … you...so you think your compliance budget...

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