Coca-Cola Co, the world's largest soft-drink maker, said federal prosecutors are investigating a former executive's charges that it inflated sales and profits.
The US attorney's office in Atlanta has started a probe into allegations by Matthew Whitley, former director of finance for the soda-fountain division, the company said in a statement.
Coca-Cola last month disclosed a US Securities and Exchange Commission inquiry.
Whitley, in two lawsuits claiming he was wrongfully fired, alleges the fountain division falsified sales and gross profits by more than US$2 billion and concealed failures with new products.
Coca-Cola acknowledged last month that employees rigged a test for a "Frozen Coke" drink at Burger King Corp three years ago, while disputing the other allegations.
"It is very unusual for the US attorney's office to initiate an investigation based upon unproven allegations in a civil lawsuit," said Craig Gillen, a former assistant US attorney and criminal defense lawyer in Atlanta.
Whitley filed his lawsuits after seeking US$44 million from the Atlanta-based company after his US$175,000-a-year position was eliminated as part of a dismissal of 1,000 workers. Coca-Cola, whose fountain division sells raw syrup used by bars, restaurants and other outlets, filed motions yesterday to dismiss the lawsuits.
Coca-Cola spokeswoman Sonya Soutus declined to comment beyond the statement, which says the company is cooperating. US attorney spokesman Patrick Crosby declined to comment.
Shares of Coca-Cola rose US$0.10 to US$43.91 at 4:16pm in New York Stock Exchange composite trading. The stock has dropped 17 percent in the past year.
"At the end of the day, I don't think it's going to mean a lot financially to Coke," said Neal Goldner, an analyst with State Street Global Advisors, which owns 71 million Coca-Cola shares. Whitley "basically tried to extort money from Coke. I give people like that very little credibility."
An internal investigation by an independent law firm found no basis for Whitley's claims that the fountain division, which accounts for a third of US sales, improperly reported US$750 million in annual expenses for three years as marketing allowances rather than rebates, the company said last month. Coca-Cola stands by the assessment, Soutus said.
The payments to customers shouldn't have been included in reported sales because not all the money went for advertising, the lawsuits claimed. In 2001, Coca-Cola reclassified its financial statements to lower sales in response to a change in accounting rules for coupons and promotions.
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