Replies to post #26468 on The Question and Answer Board (IHUB)

[sarals]

ROFL! I think I'll pass on that gem.

[BullNBear52]

Wonder if Buffet will have a Coke for lunch?
Feds Investigate Coke on Fraud Charges

By HARRY R. WEBER, AP Business Writer

ATLANTA - The Coca-Cola Co. said Friday federal prosecutors have launched an investigation of fraud allegations raised by a whistleblower in a lawsuit against the world's biggest soft drink company.

Burger King, meanwhile, said Friday it would phase out the sale of Frozen Coke at its restaurants and quit using Coke's frozen carbonated beverage machines.

Among the allegations raised in the whistleblower suit was that employees of the soft drink company rigged a market test of Frozen Coke at Burger King outlets in Virginia. The whistleblower also said some of Coke's machines that make the frozen drinks are defective, a claim Coke denies.

Coke's statement about the federal investigation did not provide any details, but said it would cooperate with the inquiry by the U.S. attorney for the Northern District of Georgia.

The Securities and Exchange Commission (news - web sites) had previously initiated an informal probe of Coke.

Coke spokesman Ben Deutsch said the company would have no further comment. A spokesman for the U.S. Attorney's Office in Atlanta also refused to comment. Coke spokeswoman Sonya Soutus would not say if the U.S. attorney's probe was criminal or civil.

The investigations were spurred by a civil lawsuit filed by former Coke manager Matthew Whitley in May that claimed Coca-Cola rigged a marketing test and artificially boosted equipment sales. Whitley's lawyer, Marc Garber, did not immediately return a call Friday seeking comment.

Last month, Atlanta-based Coke admitted that some of its employees undermined a marketing test of Frozen Coke three years ago at Burger King restaurants in Virginia. Burger King is one of Coke's largest customers.

Whitley had also alleged that more than 80,000 of the company's frozen beverage machines nationwide are defective and taint slush drinks with metal residue. Coke has denied that claim, and on Thursday filed a motion seeking dismissal of the suit.

On Friday, Burger King said it would phase out the sale of Frozen Coke because it is no longer "strategically relevant to the long-term vision of the Burger King brand."

In addition, Burger King will phase out the use of Coke's frozen carbonated beverage machines, spokesman Rob Doughty said. He did not elaborate.

Coke's Soutus said, "Our customers frequently change their product mix as their strategies evolve. We look forward to providing the beverages and services that best support Burger King's new long-term strategic objective."

A Coke auditing committee, investigating the market test and other allegations by Whitley, found that the company's fountain division had improperly valued some equipment. The company will take a $9 million pretax writedown to correct the value.

The committee said it found no evidence of other allegations in the suit, including Whitley's claim that the division improperly shifted $4 million of capital funding to a fountain project last year.

UBS analyst Caroline Levy said the new investigation announced Friday raises the seriousness level of the case for Coke.


"I think that getting the Department of Justice (news - web sites) involved adds a layer of risk," Levy said.


Coke officials have said Whitley sued after the company refused his demand for $44.4 million. He lost his job as finance director for supply management at the fountain division in March, amid a reorganization that eliminated 1,000 jobs.





The fountain division handles sales of fountain-dispensed beverages to restaurants, movie theaters and other venues.

The Frozen Coke promotion was conducted at Burger King outlets in Richmond, Va., in March 2000. An internal company document filed as part of the lawsuit said the tactic was to hire an outside consultant to spend up to $10,000 to buy value meals at Burger Kings in Richmond, boosting demand for Frozen Coke and other frozen drinks.

The suit says the Richmond promotion resulted in a $65 million investment by Miami-based Burger King in Frozen Coke.

Coke has said its investigation confirmed that some members of the Coke fountain division's account team improperly influenced the marketing test results, and said the employees were disciplined in 2001.

Shares of Coke were down 24 cents at $43.77 in midday trading Friday on the New York Stock Exchange (news - web sites).

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