Coke Finds No Truth In Lawsuit Allegations

June 17, 2003 ( - An investigation by an independent counsel and auditor have revealed no evidence to support allegations of accounting fraud and employee discrimination made in a lawsuit last month by a former manager at the Coca-Cola company.

>The Atlanta-based beverage company has announced the audit committee of its board of directors found no support for the allegations.   However, the outside investigators will continue to look into additional matters raised by Matthew Whitley, a former finance director for supply management in Coke’s fountain division, according to a Wall Street Journal report.

>In a statement, the company said an investigation by Deloitte & Touche LLP determined “further examination was warranted regarding the financial arrangements between the fountain division and certain equipment suppliers.”

Allegations Fly

>Prior to filling a lawsuit on May 19 (See  Lawsuit: Coca-Cola Carrying out Deceptive Business Practices ), Whitley and his lawyer sent a letter to the company in April outlining a laundry list of allegations including fraud and employee discrimination. In that letter, they said  Whitley would file a lawsuit if the company did not agree to pay him $44.4 million within a week, a sum Whitley’s lawyer said resented about one-third of the financial exposure that Coke would face if the lawsuit were pursued in court.

>However, Coke’s audit committee had some questions of its own and hired Deloitte & Touche, and the law firm Gibson, Dunn & Crutcher LLP to examine the allegations. Subsequently, Whiltey was not paid the requested amount and filed suit.  

>In the suit, Whitley’s lawyer portrayed his client as company veteran who notified management that Coca-Cola had a problem with metal shavings getting into its Frozen Ice Drinks.  At the same time, Whitley told company management about an alleged $65-million marketing scheme aimed at getting Burger King to become a Coke customer and the inflation of profits by falsely reporting certain syrup deliveries as sales.   Additionally, Whitely claims that Coke overstated net revenue and gross profit by recording marketing allowances to some customers as expenses rather than as rebates from approximately 1998 to 2001.

Then Whitley claims that Coca-Cola turned a blind-eye to his claims, instead letting him go for “maliciously manufacturing a false and fraudulent performance review,” the lawsuit said.

>However, after conducting the investigation Coke’s audit committee said those “marketing allowances are classified in the company’s consolidated financial statements in accordance with generally accepted accounting principles.”

>According to the company, the investigation found no evidence that the fountain division improperly shifted $4 million of capital funding in 2002. In addition, contrary to the allegations, the investigation found no evidence of discrimination against minorities and women in the fountain division.

Further, the company said the investigation confirmed that company employees on a Burger King account team “improperly influenced the test results of a promotion” in March 2000 and that they were disciplined in 2001. The audit committee was informed of the infraction at the time the discipline was imposed.