Muhtar Meets Pablo: Laundering Coke Dollars

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Coke CEO Muhtar Kent has something in common with Pablo Escobar: money laundering.

As Coca-Cola and PepsiCo’s reputations approach Big Tobacco levels, the soda industry faces a dilemma. How can it continue influencing politicians, elections and scientists while minimizing reputational blowback? Soda’s solution is simple: money laundering.

Last November, Washington state ordered a Big Soda lobbying group to pay the “largest campaign finance penalty” in U.S. history: $18 million dollars for “laundering money,” plus more recently, $1.1 million to cover the state’s fees and costs. The soda group, the Grocery Manufacturers Association, “willfully disregarded Washington state campaign finance laws.”

GMA disguised Coca-Cola and PepsiCo dollars in order to covertly lobby against Washington Initiative 522. The initiative would have required manufacturers to label genetically modified foods. It barely failed–the no votes edged out the supporters by a mere two percentage points.

Here’s how Big Soda’s money laundering worked: Pepsi paid $2.696 million, and Coke paid $1.742 million into a “special, earmarked” GMA account called “Defense of Brands.” Nestlé, Hershey’s, ConAgra and other purveyors of toxic food also contributed. The corporations paid this money on top of their normal association member dues. GMA then laundered the soda money by reporting it as GMA expenditure and hiding the true sources of funding (Coke, Pepsi, and their cohorts). Pablo Escobar hid coke revenue, and GMA hid Coke revenue, but the technique’s largely the same.

And the soda people knew exactly what they were doing. GMA’s Finance and Audit Committee assessed that this spending would be,

“identified as having come from GMA, which will provide anonymity and eliminate state filing requirements for contributing members.”

Anonymity is a valuable asset when you’re Coca-Cola, a brand that grows more toxic by the day, and you’re lobbying to hide information from consumers regarding GMOs, perhaps the most controversial food issue. Companies that lobbied against a similar California measure “faced public criticism and reported boycotts.”

As GMA’s vice president for government affairs assessed, the money laundering scheme would,

“shield individual companies from public disclosure and possible criticism” (emphasis added).

Of course, the Grocery Manufacturer’s Association isn’t the smartest money laundering vehicle. First, its soda and junk food members are well-known and publicly available. And second, if you are trying to disguise the fact that individual brands are paying you to lobby for them, maybe don’t label the account “Defense of Brands” (and while you’re at it, don’t write down the details of your illegal scheme in your meeting minutes).

Inevitably, journalists would start asking questions. So GMA provided Coke and Pepsi with “media guidance.” If a reporter asked whether Coke and Pepsi were funding the “No on I-522” campaign in Washington, GMA told Coke and Pepsi to deny it accordingly:

“No. Company X is a member of the Grocery Manufacturers Association and supports the work the association does on product safety, health and wellbeing, sustainability and a host of other issues. We support GMA, and its position on genetically modified ingredients and the association’s opposition to I-522 in Washington State. GMA’s views and financial support for the ‘No on I-522’ campaign reflect the views of most food and beverage manufacturers in the United States.”

This was false. And they knew it was false.

In October 2013, one month before Washington voted on I-522 , Attorney General Bob Ferguson filed suit against GMA. State law requires that “political campaign … contributions and expenditures be fully disclosed to the public” since “the public’s right to know of the financing of political campaigns … far outweighs any right that these matters remain secret and private.”

GMA spent over $12 million fighting the suit. Three years later, the association lost and was ordered to pay the largest fine of its kind in U.S. history. A victorious Attorney General Ferguson commented,

“The record setting penalty illustrates how egregious GMA’s conduct was. It has been a multi-year effort to hold them accountable.”

In the past few months, GMA has posted a bond to cover the fine and appealed the decision. That’s good for public health–the more they fight back, the more attention they draw to their own bad behavior.

Good news for politicians, journalists and prosecutors interested in following in Ferguson’s footsteps: The money laundering didn’t stop here. There remain at least three additional cases of Big Soda money laundering: through the CDC and NIH Foundations to influence government policy, through a charitable foundation to lobby against soda taxes, and through the International Life Sciences Institute to covertly influence research on sugar.

One can draw two conclusions from Washington state’s win against GMA. First, Big Soda is battered and bleeding. It can be beaten in the courts of law and public opinion, and in the ballot box. Public health advocates should exploit this vulnerability by bringing up this $19 million verdict wherever they’re taking on Big Soda. If these corporations will launder money to fight GMO labeling, should anyone trust them when they campaign against soda taxes or warning labels?

Second, Big Soda is not nearly as smart or slick as it seems to think. A moderately clever middle school student could have seen through this money laundering scheme.

Sorry, Muhtar. On review, you’re no Pablo.

2 comments

  1. I am writing this from our condo in Mazatlan Mexico. As my Greek wife often states, Mazatlan is “cheap Greece”—great fresh food, wonderful weather and beautiful people at about a 70% discount from Greece. There’s only one problem—Mexicans are also the number one consumers of Coke in the world. There are a lot of reasons for this but number one is the lack of safe drinking water in Mexico. Years ago Coke and other soda companies bought up these sources of clean water and turned the water into soda. Years ago Mexicans were trained that they only safe thing to drink is soda.

    Thus even the poorest beggar on the streets can be seen carrying a 2 liter bottle of Coke. A few year ago they decided to tax sugar to deal with their obesity epidemic. Consumption of soda dropped for a short period of time, but it is now rising again. Even though it is extremely easy to find fresh and wholesome food here, their grocery stores are starting to look like our grocery stores. Because Mexicans have only been eating processed food for a few centuries as opposed to those with a European background who have been eating this food for several thousand years, they are more genetically prone to obesity, metabolic syndrome and type II diabetes.

    A few years ago Chapo Guzman, the head of the Sinaloa drug cartel, was captured at a condo a block down the street from where we live. At the time he was the most wanted criminal in the world. Yet in my estimation Coke has killed a thousand times more people than the drug cartels snd they could teach the cartels a thing or two about laundering money.

  2. Pingback: The SNAP Festival of Corporate Hypocrisy | THE RUSSELLS

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