Former Manager Sues Coca-Cola for Fraud
The Globe and Mail
May 21, 2003

Atlanta: A former Coca-Cola manager alleges in a lawsuit that company officials ran a division as "an illegal racketeering enterprise" that included rigging a marketing test and using a slush fund to boost equipment sales.

The company says Matthew Whitley filed the suit after Coke refused a demand to pay him $44.4-million to prevent it.

Mr. Whitley lost his job as director of finance-supply management in March amid a reorganization that eliminated 1,000 jobs.

He said he was wrongfully fired a few weeks after telling superiors about a "culture of dishonesty" in the fountain division, which handles sales of fountain-dispensed beverages.

Mr. Whitley, 37, filed the lawsuit Monday in Atlanta.

The suit does not specify damages.

In an internal memo to employees Tuesday, Coke general counsel Deval Patrick called Mr. Whitley's allegations "very serious."

"Rest assured that we will get to the bottom of his allegations," Mr. Patrick said. "At the same time, we will vigorously defend the company from attempts to pressure it for inappropriate monetary settlements."

The company said the audit committee of the board of directors had ordered an investigation by two outside firms: the law firm of Gibson, Dunn & Crutcher and accountants Deloitte & Touche.

Among Mr. Whitley's allegations:

The leader of Coca-Cola's Burger King account signed off on a plan three years ago to influence the results of a test project in Virginia. 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, Va., boosting demand for Frozen Cokes and other frozen drinks being promoted in the test market. The document shows higher-ups punished the company official by cutting his bonus and stock options.

Whitley also alleged that Coke set up a "slush fund" to lower the cost of expensive iFountain machines so it would be easier to sell them to customers. He claimed officials had an iFountain supplier, Lancer Corp., overcharge for standard dispensers, making the iFountain machines more attractive.

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