WASHINGTON—A recent story in The Washington Post has rekindled interest in a criminal probe targeting the payments made by Chiquita, the Cincinnati-based fruit giant, to a paramilitary organization in Colombia. What is fascinating about this case is that a number of gray areas make it hard to establish whether the company was the culprit or the victim. It also sheds light on the sometimes tortuous relations between government and international business.

According to court filings cited in the story, the company says it was approached in 1997 by the United Self-Defense Forces of Colombia (AUC) about making payments to guarantee its protection from Marxist terrorist organizations. Between 1997 and 2004, Chiquita paid more than $1.7 million. In April 2003, more than a year and a half after the AUC was branded a terrorist organization by the U.S. government, Chiquita executives disclosed their actions to the U.S. authorities, adding that if the payments stopped they would have to leave Colombia, thereby hurting U.S. security interests in the region.

The Justice Department told them their conduct was illegal but executives say they left the meeting without a clear understanding that they should stop paying off the AUC. They claim that U.S. officials said they would confer with the State Department and be back in touch. They never got back to Chiquita, the executives say, so the payments continued for nearly another year. The company has pleaded guilty to making $1.7 million in payments and agreed to pay a $25 million fine. A federal judge still must decide whether to accept the plea agreement. Meanwhile, Colombian authorities are also going after the American company, which left the country in 2004 after doing business there for more than a century.

Clearly, Chiquita’s payments to the AUC after September 2001 were illegal. But at various points in this story a chasm separated reality from the written law in Colombia and in the United States, making the company’s conduct fall within the boundaries of what both governments understood to be right even if on paper it was not. When Chiquita’s payments started in 1997, a large segment of Colombian society, including official institutions desperate to resist the onslaught of Marxist guerrillas, privatized the domestic war by de facto entrusting the AUC with their defense. Suffice it to say that the governor of the state of Antioquia—the locus of Chiquita’s extensive banana operations—was Alvaro Uribe, the nation’s current president and the scourge of the left-wing terrorists. Chiquita was playing by the rules of a lawless nation as both the authorities and thousands of other businesses understood them.

Until the U.S. government decided to brand the AUC a terrorist organization, paying to protect the interests of an American company in a friendly nation seemed legal and even patriotic. After Chiquita’s actions became illegal under U.S. law and company executives approached the Justice Department to disclose their actions, the authorities acted ambiguously. According to the Post’s sources, Justice officials acknowledged the case was complicated and said they would talk to the State Department—the implication being that the U.S. would probably not want to weaken the fight against Marxist terrorism and force a major U.S. company to leave a friendly country.

Ultimately, this is a story about double standards—those applied by Colombia’s institutions, which encouraged the AUC for many years by sanctifying the very rules of the game they now decry, and those applied by U.S. authorities, who did not hold Colombia to the same legal standards to which they held their own country.

I am not implying that these things are clear-cut. A civil war, which is what Colombia suffered during the years when Chiquita was making payments to AUC, is not an environment in which the written law can always be applied. And it is easy to see why U.S. authorities were puzzled by the Chiquita case once they were told of the payments, since legality had turned into illegality overnight because of the bureaucratic decision to include AUC on the list of terrorist organizations.

Surely, the first lesson is this: When you respond to terrorists—in this case Marxist narco-guerrillas—by using their methods, you end up hurting the cause you thought you were defending, i.e. peace and liberal democracy. The other lesson is that the separation between government and business is crucial. Had there been no doubt as to where the American and the Colombian authorities stood with regard to the laws they were supposed to enforce, Chiquita would have thought twice about continuing the payments and seeking a stamp of approval—tacit or otherwise—from the U.S. government.