Bank of America Asked to Explain Its Support for the Guatemalan Death Squads

John C. Fauvre, corporate secretary of Bank of America, spent much of the month of December trying to rescue his company from an impending crisis of public relations. His flurry of meetings, conference calls and consultations with company lawyers was not precipitated by a jump in the interest rates or a run on the bank's $121 billion assets, but rather by a letter from Audrey Smock, a staff member of the United Church Board for World Ministries, which owns 11,000 shares in Bank of America.

"I am writing to express our concern over our corporation's present activities in Guatemala," states Smock's letter, dated October 30, 1981. The United Church Board was "amazed," Smock's letter said, that Bank of America was heavily involved with supporting the Guatemalan government, "one of the most brutal regimes in Latin America."

Between 17,000 and 20,000 civilians have been murdered since General Romeo Lucas Garcia assumed power in July, 1978. Amnesty International and other human rights organizations have blamed the Lucas government for the bulk of these deaths.

Smock and the United Church Board for World Ministries have good reason to be concerned about Bank of America's relationship to the repressive Guatemalan government.

The Bank of America enjoys unique prestige among the political and economic forces that run Guatemala. It is the only foreign firm known to have been granted membership in the Amigos del Pais (Friends of the Country), an exclusive club of rightwing Guatemalan businessmen and professionals.

The Amigos has conducted a multimillion dollar program of lobbying and public relations in the United States to improve the image of the Lucas government and to press the U.S. to restore military and economic aid to the country, which was suspended by the Carter administration because of Guatemala's horrendous human rights violations. Some Amigos members have been directly linked to the financing of death squads responsible for the murders of thousands of Guatemalans.

In her letter, Smock asked the Bank about its participation in the Amigos del Pais.

The Bank's response, coming from John C. Fauvre in a letter on December 10, 1981, was to claim that it had "never been a member of Amigos del Pais." Fauvre followed that denial with the qualification that the Bank "cannot control the personal actions of its officers."

In fact, the Bank's name appears on an internal membership roll circulated by the Amigos executive director in 1976. According to one Amigos source, the bank was still a member as recently as 1980. In January, 1982, the Amigos office in Guatemala City confirmed that certain Bank of America executives were still among the organization's 211 members.

Bank of America has long maintained personal ties with the landed gentry and the army officer corps. While serving as defense minister from 1974-1978, now-president Lucas received a $750,000 Bank of America loan to help finance his 26,000-acre estate in the oil-rich Franja Transversal del Norte. Bank of America also jointly financed the construction in 1978 of the 800-unit Santa Rosita military housing project, advancing down payments to individual officers.

On behalf of the United Church Board, Smock asked the bank about such "personal loans to President Lucas Garcia and other military/police officers."

Fauvre responded for Bank of America, again in a qualified way. "Bank of America's policy is to avoid lending to politicians while they are in office," said Fauvre in his letter to Smock, "except in instances where the purpose of the loan is unrelated to political activities and the collateral and procedures for repayment are not subject to direct or indirect influence by the borrower." Hardly a flat denial.

In addition to Bank of America's personal connections with, Guatemala's repressive leaders, the bank plays a crucial role in the economy of the country. It is Guatemala's largest private bank, "the agricultural bank," according to Keith Parker, manager for Bank of America operations in Guatemala. Indeed, the bank ranks second only to the government as a source of capital for the agro-export sector, the engine of the Guatemalan economy.

Bank of America has heavily invested in coffee, sugar, cotton, beef, sesame, cardamon, quinine and rubber-industries which together supply more than 80% of the nation's export income.

National banking regulations, which prohibit local banks from offering individual loans larger than $5 million, help ensure that the Bank of America-the only U.S. bank with full-service facilities in Guatemala-is in a position to serve as the primary source for financing large-scale projects.

Because of Bank of America's ties to the Guatemalan military and the bank's economic role in the country, the United Church Board for World Ministries holding 11,000 shares, along with the Sisters of the Presentation (2000 shares), St. Clara College (1300 shares), and the Unitarian Universalist Service Committee (5 shares), decided to file a shareholder resolution requesting the bank "to issue a report to stockholders by September 1982 disclosing details of Bank of America's operations in Guatemala."

The prospect of a public confrontation on Guatemala at the bank's annual meeting scheduled for April 27 shook up the company and it moved to dissuade the religious investors from proceeding with their resolution. "We've rarely seen a corporation which has acted so threatened by a stockholder resolution," says Robert Morris of the Interfaith Center on Corporate Responsibility (ICCR). "The Bank of America corporate secretary even tried to intimidate one of the religious investors," Morris says, "by asking that they seriously consider what would happen to their representatives in Guatemala should the stockholder action be made public."

The churches continued to push for the shareholder resolution. Bank of America responded by petitioning the Securities and Exchange Commission (SEC) to strike the resolution from the annual meeting agenda on the grounds that the bank would produce a report on its own without submitting the matter to public debate.

In early February, the SEC ruled in favor of the bank. "We said that (resolution) could be excluded," ex-. plains Michael Cargula, a lawyer for the SEC, "because it is moot," since the bank agreed to issue the report the shareholders were requesting.

In spite of the SEC decision, the religious groups have decided to raise the issue at the Bank's annual meeting and in public forums around the country. "The shareholders are not going to bury their concerns," says Smock. "This is a long-term campaign. " O

Allan Nairn is a freelance writer based in New York. This article is adapted in part from a research memorandum he prepared for the Council on Hemispheric Affairs.