Coke Settles Lawsuit for $137.5 Million

Coca Cola has settled a class action lawsuit by some of its institutional investors. These investors claim, according to CNN, “certain material facts concerning Coca-Cola and the condition of its business and financial results were misrepresented and omitted from various public statements purportedly made by the defendants, causing the price of Coke stock to be inflated artificially.” As is typical with this kind of settlement, Coke’s management has denied any wrongdoing.

The suit was led by the Carpenters Health & Welfare Fund of Philadelphia & Vicinity and Local 144 Nursing Home Pension Fund, now called 1199 SEIU Greater New York Pension Fund. The class covered anyone who bought Coca Cola stock between October 21, 1999 and March 6, 2000.

According to the Wall Street Journal, “the investors alleged that some key Coke bottlers had been forced in 1999 to purchase millions of dollars of excess beverage concentrate, an ingredient that Coke sells to its bottlers to make soft drinks. That practice, known as channel stuffing, helped Coca-Cola inflate its financial results, elevating its share price, the investors alleged in their complaint.”

The company issued a statement saying, “We maintain these allegations are without merit and no admittance of wrongdoing is a part of the settlement. At this time, we have determined that it is in the best interest of our business to close this matter and put this distraction behind us.”

It is interesting to note that, in 2005, the Securities and Exchange Commission found that Coke had done very much the same thing by shipping excess concentrate to bottlers in Japan, thereby misleading investors. Coke has never denied or admitted the SEC findings.

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