An allegedly rigged marketing test of Frozen Coke is the catalyst for the settlement.

MIAMI (AP) – Coca-Cola has offered to pay up to $21.1 million to Burger King 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 as of May 2000, Burger King chief executive Brad Blum said Tuesday in a letter to restaurant owners. It will also pay part of any repair costs for possibly defective machines and make up any losses that Burger King franchisees had with the equipment through June, Blum said.

Coca-Cola’s offer also includes a $6.4 million payment to Burger King, which the company plans to use for advertising, according to 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 deal “will foster an even stronger partnership with” Coca-Cola, Blum said.

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.

Miami-based Burger King, the nation’s second biggest hamburger chain behind McDonald’s Corp., is one of Coke’s biggest customers.

Federal prosecutors in Atlanta have opened a criminal investigation into fraud allegations against Coca-Cola, 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.

An internal company document filed as part of the lawsuit said the tactic was to hire an outside consultant to spend up to $10,000 to buy value meals, boosting demand for Frozen Coke and other frozen drinks.

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 Coca-Cola denies.

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On the Net:

Coca Cola: http://www.coca-cola.com

AP-ES-08-12-03 1701EDT