Seattle-based Water and Sanitation Health (WASH) has filed a lawsuit against Chiquita Brands International (NYSE: CQB) alleging unfair and deceptive marketing practices.

Polluted open waterway bordering schools and homes. Municipality of Tiquisate, department of Esquintla, Guatemala Photo: PRNewsFoto/WASH

The NGO has questioned Chiquita's promotion of its ecologically friendly and sustainable practices.

"That is far from the truth, and bananas sold to U.S. consumers should be marketed truthfully and legally," WASH founder Eric John Harrison said in a release.

WASH has alleged that local water supplies in Guatemala have been contamined by the multinational's largest contracted supplier COBIGUA.

"Chiquita sells millions of pounds of bananas that are produced in ways that destroy natural ecosystems and contaminate the drinking water of local communities living next to Chiquita's largest Guatemalan supplier," Harrison said.

"The pesticides and fungicides used on these Chiquita-contracted plantations are toxic, and the aerial application falls on homes, schools, and residents."

The lawsuit states that drinking and river water near the plantation have become polluted from the use of pesticides, fungicides and fertilizers, and has contaminated the drinking water in six local communities, affecting some 7,200 Guatemalan residents.

The release said the Rainforest Alliance was not aware of this until recently, but it had taken some Chiquita marketing materials off its site as a result.

"When I brought this to their attention, both they and Chiquita became very uncomfortable," Harrison said.

"If consumers believe the little-green-frog endorsements given by the Rainforest Alliance are true, then the Rainforest Alliance ought to be certain that those products are indeed eco-friendly and farmed in a sustainable, non-polluting, non-harmful manner as they claim. Otherwise, why should consumers think that the Rainforest Alliance is anything more than a marketing tool?"

He said the Rainforest Alliance was re-thinking its endorsement, but "as of today, the Rainforest Alliance still gives the impression that Chiquita, one of their largest donors, sells bananas that are grown in a manner that is safe to the environment and to local communities. I doubt the people living in six Guatemalan villages living adjacent to the plantation supplying Chiquita would agree".

The complaint outlines specifics: 420 gallons of various fungicides are spread over one plantation every 8 – 10 days; there are no buffer zones around the plantations to keep the overspray from falling on homes, residents, and schools; the drinking water in adjacent communities contains nitrites and heavy metals at 10-times the recommended levels recommended by the World Health Organization (WHO).

The lawsuit has been filed under the Consumer Protection Act.

Cutrale-Safra on the offensive in Chiquita acquisition bid

In other news relating to the multinational, Cutrale-Safra announced today that it had mailed a definitive proxy statement to Chiquita shareholders, calling on them to vote against a merger with Ireland's Fyffes Plc (ESM: FFY).

The two Brazilian companies highlighted their US$13 per share offer represented a 29.2% premium on the share price, claiming there would be no risk and only upside from the Chiquita board engaging with them.

The companies, through their subsidiary Cavendish Global Limited, claimed the proposed merger favored Fyffes shareholders more than Chiquita shareholders, emphasizing that the latter have suffered from a record of "value destruction and poor strategic decisions".

Cavendish said the multinational had consistently missed Wall Street consensus earnings estimates, and had underperformed relative to its peers over the last decade.

The group also said Chiquita's claim that it would save a further US$20 million through synergies with Fyffes defied credibility.

"The Chiquita-Fyffes announcement that they suddenly have discovered an additional $20 million of alleged synergies for their proposed business combination, just weeks before the Chiquita shareholder vote, not only smacks of desperation but, more importantly, we believe underscores the irresponsibility and lack of judgment of the Chiquita board in promoting this transaction," Cavendish said in a release.

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