Coca-Cola Offers to Pay $21.1M Over Probe
Aug. 12, 2003
MIAMI (AP) _ Coca-Cola Co. has offered to pay up to $21.1 million to Burger King Corp. and its restaurants to repair damage caused by allegations that the soft drink company's employees rigged a marketing test of Frozen Coke at the fast-food outlets.
Coca-Cola will pay $1,000 to each restaurant that had a Frozen Coke machine installed as of May 2000, part of any repair costs for the machines and any losses that Burger King franchisees had with the equipment through June, Burger King Corp. Chief Executive Brad Blum said Tuesday in a letter to restaurant owners.
Coca-Cola's offer also includes a $6.4 million payment to Burger King Corp., which the company plans to use for advertising, said a copy of the letter obtained by The Associated Press.
Eighty percent of Burger King franchisees must approve the terms of the agreement, Blum said.
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 whistleblower's lawsuit. Former Coke manager 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 originally said it would stop selling Frozen Coke, but last week said that it had come to an agreement with Coke and would not phase out the slushy beverage, which is sold there as ICEE.
Whitley also said in his suit that some of Coke's machines that make Frozen Coke were defective, a claim Coke denies.
Coca-Cola shares were up 3 cents to close at $44.65 on the New York Stock Exchange. Burger King is not publicly traded.
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