Coca-Cola Co. (KO), has agreed to pay $137.5 million to settle a lawsuit filed by a shareholder claiming that the company artificially inflated sales to boost its stock price.
The settlement was filed last Thursday in U.S. District Court in Atlanta. The agreement between the Georgia, Atlanta-based soft drink giant and plaintiffs led by Carpenters Health & Welfare Fund, an institutional investor based in Philadelphia, brings to an end the 8-year-old class-action complaint originally filed in October 2000.
The lawsuit claimed that in 1999, Coca-Cola and four former company executives had forced some bottlers to purchase hundreds of millions of dollars of unnecessary beverage concentrate in an effort to secure higher-than-actual sales figures, in a practice popularly referred to as "channel stuffing."
The plaintiffs had sought damages for investors who bought Coca-Cola stock when its prices were thus artificially inflated by means of the ruse.
However, Coke said it had agreed to a settlement without admitting any wrongdoing. The firm added that it reached the agreement because it deemed that doing so would be in the company's best interest, allowing it to move forward and avoid lengthy and unnecessary litigation.
Earlier, in April 2005, Coke settled similar accusations by the Securities and Exchange Commission. This agreement concluded that the company had misled investors by shipping excess beverage concentrate to bottlers in Japan from 1997 through 1999.
Coca-Cola admitted no wrongdoing and paid no fines in that settlement pact, but agreed to cease and desist from future securities violations and maintain tight internal controls on sales to bottlers and customers.
The settlement applies to anyone who acquired Coca-Cola common stock from Oct 21, 1999 through March 6, 2000.
Last week, Coke effected a management succession, with Muhtar Kent officially taking over the CEO role from Neville Isdell, who announced his decision to step down from the position in December 2007.
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