Marketing Allowance Allegations Trigger Coke Fraud Probe

21 May 2003

Allegations of overstated revenues and gross profits through manipulation of customer marketing allowances have been levelled at Coca-Cola by the company’s former divisional finance director for supply management.

Coke has responded by appointing two external firms – accountants Deloitte & Touche and law firm Gibson, Dunn & Crutcher – to probe these charges, made in a lawsuit filed May 19 in Atlanta. The plaintiff is Matthew Whitley, until March this year a senior executive in the company’s fountains division supplying beverages to movie theatres, restaurants and sports venues.

Whitley, who had been ten years with the company, also filed for wrongful dismissal after raising questions about the alleged practices. In addition, he charges that Coke fabricated a market survey in order to persuade a customer to take part in a frozen-beverage campaign.

Although Whitley’s motives for filing the charges are doubtless public-spirited, cynics note his attorney wrote Coca-Cola on April 28 warning that his client would proceed with the lawsuit unless the company agreed within one week to pay him $44.4 million (€37.90m; £27.03m). Large though that sum may be, Whitley’s attorney obligingly drew to Coke’s attention that it equated to just one-third of the financial exposure a court case would create.

The beverage behemoth declined to comment on the merits of Whitley’s case prior to the outcome of the independent inquiry. It had instigated this, explained a Coke-spoke, “so that there would be absolutely no doubt about the integrity and objectivity of the investigation”.

And in a memo to employees, the company issued a veiled warning: “Rest assured that we will get to the bottom of [Whitley’s] allegations. At the same time, we will vigorously defend the company from attempts to pressure it for inappropriate monetary settlements.”

Data sourced from: The Wall Street Journal Online; additional content by WARC staff