Ethic Business

Terrorist Payments

Prepared by Jonathan Erickson, Kelli Hickey, Eric Tinoco, and Stephen Winn

1. Summary

The case opens with Alex McAdams, recently retired CEO, being asked to join the Board of Consolidated Mines International Inc. The case tells us that CMI operates mines in Central America and northern South America and in 2004 its revenues were approximately $4.5 billion and it had about 25,000 employees worldwide. To aid his decision on joining the Board, Alex decided to conduct his own due diligence. During this process Alex found two issues and decided to discuss these with Cameron Derry, the CEO of CMI. The issues involved questionable business practices and political instability within many of the Latin American countries in which CMI mines are located.

During their lunch meeting, Cameron shared some of CMI’s history going back to the 20s. This included allegations that CMI bribed government officials, interfered with local unions, and allegedly participated in the overthrow of a Latin American government. In the 90s there were charges that CMI exploited its employees, created pollution, and facilitated the importing of illegal narcotics. In an effort to alleviate Alex’s concern over CMI’s business practices, Cameron stated to Alex that, “None of these allegations have ever been proven in a court of law.”

In response to Alex’s concern regarding the political environment of CMI’s operations, Cameron admitted that “There is no effective government in which we operate.” At this point, Cameron informed Alex that the paramilitary are in control of the countryside where CMI’s mines are located. Cameron describes these paramilitary groups as “unsavory organizations, [with] their own death squads” who “have been involved in tens of thousands of Latin Americans.” At this point, Cameron states to Alex that the paramilitary does not interfere with the company’s operations because CMI has been paying them off for 10 years. Cameron admits to Alex that...