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Coca-Cola under probe
11/07/2003 21:09 - (SA)
Washington - Coca-Cola, the world's largest soft drinks maker, said on Friday the US Justice Department had launched an inquiry into the company's accounting and marketing practices.
The drinks multinational said the government probe is related to a private civil suit filed recently against Coca-Cola by a former employee, Matthew Whitely.
Whitley's lawsuit claims Coca-Cola engaged in deceptive accounting and marketing practices and knowingly sold contaminated drinks.
"The Coca-Cola Company has been informed that the United States Attorney's Office for the Northern District of Georgia has initiated an investigation arising from the allegations raised in civil litigation recently filed in Atlanta by Matthew Whitley, a former employee," the company said in a statement.
"The company will co-operate with the inquiry," Coca-Cola said.
Citing standard Justice Department policy, a spokesperson for the US Attorney's Office for the Northern District of Georgia would neither confirm or deny any investigations.
A source familiar with the probe said the maker of Coca-Cola, Dasani Water, Dr Pepper and Fanta was informed of the government probe earlier this week.
However, the source, who asked to remain anonymous, said Coca-Cola has been given few details at this early stage about the precise focus of the government investigation.
Whitley, a former finance director at Coca-Cola's headquarters in Atlanta, Georgia, left the company in late March of this year.
The former executive says he was fired by the drinks maker after he brought his concerns about the alleged fraud to the attention of the board.
He claims he also told the board Coca-Cola had a problem with its Frozen Ice Drinks, among other complaints he brought to the board's notice, because metal shavings were getting into the drinks.
Coca-Cola says he was dismissed as part of a group-wide program of some 1 000 redundancies following a bout of corporate restructing.
Whitley subsequently filed a lawsuit against the beverage giant alleging it was involved in accounting and marketing fraud, particularly with respect to marketing practices at the 'Fountain Division'.
Coca-Cola has denied Whitley's allegations, and said in an internal memorandum to employees June 17 that it would respond "through the legal process, vigorously defend ourselves in court, and are confident of our position."
Despite this, on the same day, Coca-Cola said it was writing down $9m to correct accounting issues in one of its drink's divisions related to certain deals with the fast food chain Burger King.
At the same time it also said that members of the Fountain Division's account team for Burger King "improperly influenced the test results" of a promotion involving frozen carbonated drinks that was conducted in Virginia during March 2000.
The individuals involved were subsequently disciplined by the company, according to Coca-Cola.
Recent media reports have also said that Coca-Cola is being investigated by the Securities and Exchange Commission, but a Washington-based spokesperson for the SEC declined to comment.
Unlike Whitley's civil suit, the Justice Department has the power to bring criminal proceedings against executives or a company if it believes it has sufficent evidence to warrant such charges.
- AFX
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