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Coca-Cola Offers to Pay $21.1M Over Probe

August 13, 2003

MIAMI (AP) _ Hoping to mend a rift with an important customer, Coca-Cola Co. is offering Burger King restaurant operators more than $21 million in response to allegations that Coke employees rigged a beverage marketing test at the fast-food outlets.

Each Burger King Corp. restaurant with a Frozen Coke machine installed as of May 2000 will get $1,000 from Coca-Cola as part of any repair costs for the machines and any losses that franchisees had with the equipment through June, Burger King CEO Brad Blum said Tuesday in a letter to restaurant owners.

At least 80 percent of the franchisees must accept the agreement, which would total $21.1 million, Blum wrote. The offer also includes a $6.4 million payment to Burger King Corp., which the company plans to use for advertising, according to the letter obtained by The Associated Press.

The agreement ``will foster an even stronger partnership with″ Coca-Cola, Blum said. Miami-based Burger King is one of Coke’s biggest customers and is the nation’s second biggest hamburger chain behind McDonald’s Corp.

Coca-Cola spokesman Dan Schafer and Burger King’s National Franchisee Association president Julian Josephson declined to comment on the proposed agreement. The association’s members include more than 90 percent of the chain’s owners.

The U.S. Attorney’s Office in Atlanta is investigating the fraud allegations, first made in a former Coke manager’s lawsuit. Matthew Whitley claimed Coca-Cola rigged a marketing test of the popularity of the new drink and artificially boosted equipment sales.

In June, the world’s biggest soft drink company acknowledged that some of its employees undermined the test of Frozen Coke three years ago at Burger King restaurants in Virginia and said the workers had been disciplined.

Whitley’s lawsuit, which was filed in state and federal courts in Atlanta, said the promotion resulted in a $65 million investment by Burger King in Frozen Coke. Burger King initially said it would stop selling Frozen Coke, but last week announced an agreement with Coke that would continue sales of the slushy beverage, which the restaurant calls ICEE.

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On the Net:

http://www.coca-cola.com

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