Coca-Cola Admits Tampering With Burger King Promo

A lawsuit by a former employee has turned into a huge black eye for Coca-Cola, which this week acknowledged tampering with a promotion for frozen beverages at Burger King. Coca-Cola also revealed that the Securities and Exchange Commission made an informal request for documents related to the accusations made in the lawsuit.

In response to another allegation raised by the former employee, Matthew Whitley, the company will take a $9 million pretax write down to correct the improper valuation of some fountain dispenser equipment.

The soft drink giant admitted that it padded the test results of a Burger King promotion in Virginia in 2000. According to the lawsuit, after a three-week test of frozen beverages offered with Burger King value meals went poorly, members of Coca-Cola’s fountain division hired a man for $10,000 to take hundreds of children to Burger King to buy the meals.

Coca-Cola’s audit committee said the employees involved “improperly influenced the test results of a promotion.” The employees were disciplined in 2001, the committee said.

Coca-Cola denies the suit’s claims that the company was trying to get Burger King to spend more on Coca-Cola’s frozen drink products, saying instead that the QSR had already expanded Frozen Coke to 75% of its restaurants before the Virginia test.

On Tuesday, Coke President and COO Steve Heyer sent a letter to Burger King CEO Brad Blum apologizing for the incident, according to news reports. Burger King says it is conducting its own investigation and issued a statement that read in part: “We expect and demand the highest standards of conduct and integrity in all our vendor relationships and will not tolerate any deviation from these standards.”

Coca-Cola’s announcements come in response to a lawsuit filed May 19 in Atlanta by Whitley, who was laid off in March during a downsizing of 1,000 employees, from his position as director of finance-supply management (Xtra, May 22). Coca-Cola said the suit was filed after it refused to pay Whitley $44.4 million to keep quiet about what he knew. The company said it assigned its internal audit committee as well as law firm Gibson, Dunn & Crutcher and accountants Deloitte & Touche to investigate Whitley’s allegations.

Whitley’s attorney Marc Garber stated that Coca-Cola’s admission of tampering with the test results is a vindication for his client and that he intends to proceed with the lawsuit, according to news reports.

Coca-Cola’s audit committee also said it found no evidence of Whitley’s accusations that it was discriminating against minorities or women or that the fountain division had improperly shifted $4 million to develop a new beverage-dispensing system.