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Coke Exec Steps Down Amid Scandal

August 26, 2003|From Bloomberg News

Coca-Cola Co. on Monday replaced the head of a division being investigated by federal authorities for rigging a marketing test conducted for Burger King Corp.

Tom Moore, president of Coca-Cola's soda-fountain business since 1999, was succeeded by marketing executive Chris Lowe, the Atlanta-based company said in a memo sent to employees. The unit, which sells syrup concentrate to restaurants and bars to mix into drinks, accounts for about a third of the company's U.S. sales.

The Securities and Exchange Commission and federal prosecutors are looking into Coca-Cola's conduct in 2000 to get Burger King to market its Frozen Coke drink. The deception was disclosed by Matthew Whitley, former director of finance for the division, as part of his two wrongful-termination lawsuits that allege Coca-Cola inflated sales and profit.

"Coke is doing the right thing to protect its credibility," said Phil Larkins, who manages $360 million for Northern Trust Corp. in Atlanta, including 200,000 Coca-Cola shares. "Coca-Cola, being the world's most recognized brand name, can't afford to have its reputation harmed."

Shares of Coca-Cola rose 79 cents to $44.07 on the New York Stock Exchange.

Moore, who was named in Whitley's lawsuits, remains with Coca-Cola in a "transitional role," the company said. Moore did not return a call to his office.

Coca-Cola acknowledged the faked test in June. It said an internal investigation showed no improper accounting. "Tom, after he carefully considered the recent events, felt a management change was necessary to avoid distractions," a Coca-Cola spokesman said.

Lowe, a 14-year veteran of Coca-Cola, has worked as an executive supervising the fountain business, marketing research and brand strategy.

The change comes as sales of the U.S. fountain business are declining. Sales dropped 4% in the first quarter and 1% in the second quarter, as a sluggish economy hurt demand at restaurants, Coca-Cola said. Burger King is the company's largest customer after rival restaurant chain McDonald's Corp.

Coca-Cola President Steven Heyer apologized to Burger King in June and the company this month agreed to pay Burger King as much as $21.1 million in compensation.

"This is fallout from the scandal," said Tom Pirko, president of Bevmark, a food and beverage industry consultant. "Somebody had to take a hit."

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