Coca-Cola Sued for Misleading Shareholders on Profits
A California law firm has filed a suit in federal court in Atlanta
seeking class action, alleging Coke, some of its officers and some
of its directors "made false and misleading statements regarding Coke's
business and prospects."
San Diego-based Lerach Coughlin Stoia Geller Rudman & Robbins LLP
said it filed the suit on behalf of people who bought The Coca-Cola
Co. stock between Jan. 30, 2003 and Sept. 15, 2004.
According to the suit: "The true facts, which were known to defendants
but concealed from the investing public, were as follows: (i) Coke's
business strategy was flawed and its business model was not working;
(ii) Coke's relationships with its key bottlers were impaired and
harming Coke's economic performance; and (iii) as a result of the
above, Coke's earnings going forward would be diminished."
On Sept. 15, 2004, Atlanta-based Coca-Cola revealed that its second
half 2004 financial results would be below forecasted levels. Coca-Cola
Co.'s profit grew 12 percent in 2004, while revenue was nearly flat
and worldwide case volume grew only 2 percent.
Coca-Cola recently accepted a cease-and-desist order in a settlement
with the federal government in its investigation of Coke's alleged
channel stuffing in Japan between 1997 and 1999. The reforms included
the creation of an ethics and compliance office, but Coca-Cola did
not have to pay any fines.
The settlement ended an investigation by the Securities and Exchange
In late January 2004, three former Coca-Cola finance officials told
federal investigators that they saw an overstatement of financial
results due to shipping excessive beverage concentrate to bottlers
Coca-Cola also reported in January 2004 that the federal government
first began an investigation of the company after a former employee,
Matthew Whitley, filed suits against Coca-Cola accusing Coke of rigging
a marketing test by Burger King in 2000, overstating revenue and profit,
using slush funds to hide losses on the company's failed computerized
fountain drink dispensing system, selling frozen drinks that contained
metal residue and discriminating against African-American and Hispanic
In October 2003, Whitley agreed to settle with Coca-Cola for $100,000,
a $140,000 severance package and his attorney's fees of $300,000.
The Department of Justice has since closed the investigation it began
after Whitley's allegations.
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