An Alabama mining company on Thursday denied having any relationship with right-wing death squads in Colombia and said it has no intention of settling a related U.S. lawsuit.

A federal judge in Alabama last month allowed a civil suit to go forward against Drummond Co. Inc. for allegedly paying a hit squad to kill three union leaders in 2001 at one of its Colombia mines.

In a related move, Colombia's chief prosecutor announced a formal criminal investigation into Drummond Tuesday for alleged ties with to paramilitaries.

"Drummond publicly states that it has not nor will it make any payments, agreements or transactions with illegal groups and emphatically denies that the company or any of its executives has had any involvement with the murder of three labor union leaders," the company said a statement issued at a news conference. "It will not settle with the plaintiffs."

Drummond's defense comes as another U.S. multinational, fruit giant Chiquita Brands, has acknowledged funneling $1.7 million to far-right paramilitary militias in Colombia.

Chiquita has agreed to pay a fine of $25 million for funding a paramilitary group listed as a "foreign terrorist organization" by the U.S. State Department.

Colombia is embroiled in its worst political scandal in decades as revelations continue to emerge tying the country's political class — many of them backers of President Alvaro Uribe — and the far-right paramilitaries.

The political scandal is now inching toward Drummond, which mines coal along the Caribbean coast, a longtime paramilitary stronghold.

At the news conference, Jose Miguel Linares, a local Drummond vice president, acknowledged under questioning that one of its directors, Alfredo Araujo, is a cousin of Sen. Alvaro Araujo, who was jailed last month on charges of working with the paramilitaries to kidnap a political rival.

The scandal prompted Sen. Araujo's sister, Maria Consuelo, to step down as foreign minister.

Drummond said it has full confidence in Alfredo Araujo.

Drummond appears to have been shaken by accusations by a former paramilitary collaborator, Rafael Garcia, a key witness in the unfolding scandal, who is in prison.

Garcia says he was present when the president of Drummond Colombia, Augusto Jimenez, handed over "a suitcase full of money" in 2001 to a representative of regional paramilitary warlord Rodrigo Tovar Pupo.

"According to what I heard, Mr. Jimenez indicated at this meeting that this money was to be given to Rodrigo Tovar Pupo to assassinate specific union leaders at Drummond," Garcia said in a May 13, 2006 deposition to the lawyers of the three murdered union leaders.

Garcia said that later the union members killed were the same as those mentioned in the meeting.

A Drummond lawyer, Hugo Palacios, told reporters Thursday that the company "emphatically denies" that such a meeting occurred and that it was in any way involved with the killings of union members.

"Civil and criminal charges for slander and defamation against Garcia have been filed and we are confident that it will be proven that Garcia's testimony is false," he said.

Drummond, based in Birmingham, is the second-largest producer of coal in Colombia.