THE CON: The United Brands Co. had serious problems with its banana business in 1974, thanks to a hurricane and new South American taxes. But Eli Black had a plan to steer through the rough patch: a huge bribe to the president of Honduras.
THE DAMAGE: $2 million in bribe money, or about $5.9 million today.
THE OUTCOME: Before word of the nearly $2 million in bribes leaked, the CEO leapt to his death from the 44th floor of his office building. In response to the scandal, Congress passed the Foreign Corrupt Practices Act in 1977. United Brand began a slow process of recovery and, in 1990, changed its name to Chiquita Brands International.
More than 500 people attended Eli Black's funeral in 1975 – most of them stunned by his suicide. It wasn’t clear what had driven the former rabbi to such a desperate act. As the CEO of a billion-dollar conglomerate, he was accustomed to a high pressure lifestyle. The exact nature of the pressures that drove Black to suicide, however, was soon revealed.
The descendant of ten generations of rabbis, Black chose his own path when he entered the world of investment banking. In the late 1960s, he created AMK Corporation, a group of small manufacturing companies. He snapped up John Morrell meat products and turned AMK into a major player. He underscored the point in 1969 when he bought 733,000 shares of United Fruit in the third largest deal in Wall Street history. Black merged United Fruit, the producer of Chiquita ban
anas, with his other holdings – which included the Baskin-Robbins ice cream parlor chain and A&W root beer – to create a $2 billion conglomerate called United Brand Co.
Black immediately set about to change both the performance and reputation of his new banana operation. United Fruit was known to be exploitive; so Black made sure his company paid its workers in Honduras five times what his competitors paid. He also began providing workers on Latin American plantations with medical care and housing. In an effort to boost profits, Black had the operations modernized by replacing old banana boats with refrigerated ships.
Black repositioned United Brand in other ways. To settle an antitrust lawsuit, he sold plantation land in Guatemala. In 1973, he told a reporter for Time magazine that he intended to shift from growing bananas to transporting and marketing them; to that end, the company began handing over some of its banana land to the governments of Costa Rica and Honduras.
That same year, United Brand fell behind Dole, dropping from its position as the number one banana seller in the U.S. Still, the company saw a net profit of $10 million in the first quarter of 1974 - before Hurricane Fifi hit, destroying several plantations in Honduras. The year also brought news of a joint tax on exported fruit issued by the governments of Panama, Costa Rica and Honduras.
With fewer banana crops and loan payments due, Black agreed to sell Foster Grant, a subsidiary, to a West German chemical company for $70 million. Then, in the move that sealed his fate, he authorized a bribe of $1.25 million to the government of Honduras, with the promise of another payment of the same amount, in exchange for a break on the shipment tax. The money went straight to the country's president, Oswaldo Lopez Arellano. United Brand also paid $750,000 to officials in Italy to create fresh business opportunities in Europe.
In February of 1975, attorneys for United Brand alerted the Securities and Exchange Commission of the bribes. In a last ditch effort at avoiding a scandal, the company filed a cautious annual report; the terms of the bribe were filed separately, along with a request for confidentiality.
Black knew it was only a matter of time before the story broke in all the major newspapers – exposing dormant corruption in United Brand and noting his role in the scandal. Rather than face certain disgrace, Black rode the elevator to his office in the Pan Am building in New York City, smashed his briefcase through the window and leapt to his death from the 44th floor.
