Coca-Cola, Tax Evasion & the SEC's 'Revolving Door'
July 31, 2013 Killer Coke Newsletter
- Is the SEC Shielding Coca-Cola from the Campaign to Stop Killer Coke?
- Coke's Tax Evasion & Tax Avoidance Hurting the U.S., Mexico, Vietnam & The Philippines
Ray Rogers, director of Corporate Campaign, Inc./Campaign to Stop Killer Coke is challenging the Securities and Exchange Commission (SEC) over the revolving door syndrome involving the agency and The Coca-Cola Company. SEC Chair Mary Jo White and SEC Chief of Staff Lona Nallengara, among others at the SEC, were partners in law firms that list Coca-Cola as a major client. And numerous SEC employees now working for corporate law firms that represent Coca-Cola and Coca-Cola's auditor, Ernst & Young, have filed disclosures that they will represent their firms' clients before the SEC.
"It's difficult enough challenging the world's largest beverage company over widespread labor, human rights and environmental abuses without having the Securities and Exchange Commission trying to shield the company from exposure and accountability," said Rogers.
On April 1, 2013, Mr. Rogers, who had previously filed a whistleblower complaint with the SEC against The Coca-Cola Company, was contacted by Nicholas Panos, Senior Special Counsel, Office of Mergers & Acquisitions, Division of Corporate Finance of the SEC. Mr. Panos complained about Mr. Rogers' organization's website, KillerCoke.org, and the Campaign to Stop Killer Coke newsletter. Mr. Panos wrote "We note the assertion that readers of your newsletter might 'have concerns about the way Coca-Cola abuses people and the environment...' Similar inflammatory statements may be found at other locations on your website...Please delete these statements from the website...or provide us with the factual foundation in support."
In response, Mr. Rogers, in an April 15 letter to Mr. Panos made it clear that "We stand by our statement that The Coca-Cola Company abuses people and the environment and we have no intention of deleting anything from either of our websites — KillerCoke.org or StopCokeDiscrimination.org, including posters that claim that Coke's CEO Muhtar Kent is a liar.
Mr. Rogers in a letter to Mr. Panos dated June 24, 2013, said he was still waiting a reply to his April 15th letter:
"Your lack of response to my letter after you raised very serious questions about the legality of my actions reinforces suspicions I have as to the real reason the SEC contacted me in the first place. I can't help but feel that the SEC is acting to intervene to the benefit of The Coca-Cola Company by attempting to intimidate me or otherwise curtail my activities regarding the company...
"Given all this, I still have to wonder whether the SEC has taken, or is going to take, any action on my whistleblower complaint. If no action is going to be taken, I have to ask, Why not? — especially in the face of the compelling evidence put forth regarding Coca-Cola's and Mr. Kent's clear violations of SEC rules and regulations...
"With respect to The Coca-Cola Company, it seems that the SEC is asleep on the job or that the SEC is willfully acting as a shield for the company.
"I would like to know from you, Mr. Panos, since you have reached out to me concerning my activities with The Coca-Cola Company, has the SEC done anything with my whistleblower complaint concerning my allegations of securities fraud against The Coca-Cola Company and its CEO Muhtar Kent filed with the SEC in 2011 and updated twice since?"
As of the date of this newsletter, Ray Rogers has not received any reply to either his April 15th letter to Mr. Panos, or his June 24th letter sent to Mr. Panos with copies to SEC's five commissioners, including Mary Jo White; Mr. Nallengara, and Rhea Kemble Dignam, SEC's Atlanta Regional Office Director.
2. Coke's Tax Evasion & Tax Avoidance in the U.S., Mexico, Vietnam and The Philippines: Cheating Governments and Citizens Out of Necessary Public Jobs & Services
Coca-Cola has been cited for its tax evasion and tax avoidance schemes that continue to cheat cash-strapped countries out of money needed to provide critical public services. We are focusing on four countries in this newsletter and we would like to hear from citizens in other countries where Coke is suspected of tax fraud.
"Tax avoidance has helped push corporate income tax revenue, as a share of all federal revenue, to historically low levels, meaning corporations bear a much smaller share of the tax burden, leaving more for American families to carry. According to the Congressional Research Service, the share of corporate income taxes has fallen from a high of 32.1 percent of federal tax revenue in 1952 to just 8.9 percent in 2009. Meanwhile, payroll taxes — which almost every income earner, rich, middle-income and poor, must pay — have skyrocketed from 9.7 percent of federal revenue to 40 percent..." (Excerpt from a press release issued by U.S. Senator Carl Levin's office)
In September, 2012, Sen. Carl Levin, D-Mich., chairman of the U.S. Senate Permanent Subcommittee on Investigations, reported that The Coca-Cola Company ranks #11 in tax avoidance among U.S. multinational companies, stashing $13.9 billion, or 88% of its $15.8 billion in cash in offshore accounts. He stated: "At a time when we face such difficult budget choices, and when American families are facing a tax increase and cuts in critical programs from education to health care to food inspections to national defense, these offshore schemes are unacceptable."
In our October 31, 2011 Campaign to Stop Killer Coke newsletter, we reported that Coca-Cola Chairman and CEO Muhtar Kent had complained about the "very large tax burden" of American corporations. However, a September 27, 2011 article in The Nation exposed Kent's lie: "...Coca-Cola enjoys very low federal taxes, and pays a lower rate than most Americans. According to Citizens for Tax Justice, the company's current federal tax expense is $470 million, which is only 6.5 percent of the $7.2 billion in pre-tax profits that Coca-Cola reported last year..."
In The Nation's November 28, 2012 story, "What the CEO's Lobbying on the Fiscal Cliff Really Want", George Zornick reported that "a merry band of corporate executives" including Coca-Cola CEO Muhtar Kent were lobbying administration officials and Congressional leaders to lower the corporate tax rate. They also want to bring billions stashed overseas back to the U.S. without paying any taxes! To make up for the taxes corporations like Coca-Cola do not pay, corporate executives would shift the burden onto the poor and elderly by "reforming"(i.e. slashing) Medicare and Social Security benefits and cutting other programs benefiting children and the 99%.
We also posted two other articles, one in May 2009 and one going back to August 2004, exposing Coke's use of the Cayman Islands as a tax haven to avoid a tax rate that most Americans pay. Bloomberg reported in 2004 and again in 2009 that Coca-Cola is one of thousands of companies that use an address of a five-story building named the Ugland House in Grand Cayman as an official address. President Obama, it was reported, referred to the Ugland House when he said: "On the campaign, I used to talk about the outrage of a building in the Cayman Islands that had over 12,000 businesses claim this building as their headquarters. And I've said before, either this is the largest building in the world or the largest tax scam. And I think the American People know which it is: The kind of tax scam that we need to end."
"The Caribbean island has helped scores of U.S. companies, including Coca-Cola Co. and Oracle Corp., to legally avoid billions in tax payments to the U.S. government," said then-U.S. Senator Byron Dorgan [D-ND].
"When companies...like Coca-Cola, decide they want to minimize their participation in the payment of taxes for that which we enjoy in this country, it bothers me," Dorgan said.
Corporations like Coca-Cola are the cause of so many critical public services being cut — education, health care, trash removal, law enforcement and firefighting as well as social services for the elderly, children and disabled.
"Coke: The Tax Dodger that Sued a Sovereign Nation" by Bud Meyers, Bud-Meyers.blogspot.com, February 25, 2013
What the CEOs Lobbying on the Fiscal Cliff Really Want, by George Zornick, The Nation, Nov. 28, 2012
"Beltway Buzzes About Coca-Cola's Bogus Tax Complaint" by George Zornick, The Nation, Sept. 27, 2011
"Coca-Cola, Oracle, Intel Use Cayman Islands to Avoid U.S. Taxes" by David Evans, Bloomberg, May 5, 2009
"THE $150 BILLION SHELL GAME," by David Evans," Bloomberg Markets, August 2004
"More than 150 U.S. companies, including Coca-Cola and Intel, have subsidiaries in the Cayman Islands. That costs the U.S. billions in lost taxes
Mexican President Enrique Pena Nietro
In Mexico, "tax evasion in the formal economy and tax avoidance in the informal sector are costing the Mexican government an estimated $50 billion a year," according to America's Market Intelligence. This means, "Mexico has one of the lowest tax intakes among OECD [Organisation for Economic Cooperation and Development] countries." Mexican President Enrique Pena Nietro says he is going after tax evaders. We suggest going after The Coca-Cola Company would be a sensible place for President Pena Nietro to start.
Evidence shows that The Coca-Cola Company has apparently cheated Mexican workers and the Mexican government out of hundreds of millions or even billions of dollars over the past couple of decades through an illegal scheme of simulation and tax evasion which continues to this day. This is an extremely serious issue and Coca-Cola could face having to pay billions of dollars in restitution and fines if Mexican authorities have the guts to make it happen.
(See Corpusiure report below: "The Coca-Cola Company Investigated for Tax Evasion").
Coca-Cola's CEO Muhtar Kent, has repeatedly lied to shareholders and to the public when questioned about lawsuits and ongoing investigations by Mexican authorities into this scheme. Coke's corrupt activity became apparent when a former Coca-Cola employee, Angel Alvarado AgŁero, found it necessary to sue Coca-Cola for retaliation over his refusing orders to carry out an illegal plan to destroy Coke's competition at 700,000 mom & pop stores where 80% of soft drinks in Mexico are sold.
Angel Alvarado AgŁero
Former 16-Yesr Employee
The Coca-Cola Co., Mexico
His Case is Exposing Corruption in Mexico
Mexico leads all countries in per capita consumption of Coca-Cola soft drinks which health experts say fuels the obesity and diabetes epidemics. Unfortunately, because company's like Coca-Cola are evading payment of taxes, there are scarce revenues for badly needed healthcare facilities and services for which Mr. Kent and Coca-Cola have created a greater need!
Corpusiure Warns Clients Not to Follow in Coca-Cola's Footsteps.
The entire report In English: http://www.corpusiure.com.mx/Ingles/boletin_2011/May.pdf
El informe complet en Espanol: http://www.corpusiure.com.mx/boletin_2011/Mayo_11.pdf
SEC Complaint Filed over Coke's Failure to Disclose Risk of Legal Problems in Mexico: http://www.killercoke.org/complaint_filed_with_sec_regarding_mexico.php
Campaign Director Ray Rogers questioning Coke CEO Muhtar Kent at 2011
annual meeting about growing Mexican scandal that Kent has repeatedly lied about
Watch on YouTube
CORPUSIURE International Associated Firms, headquartered in Mexico City's World Trade Center, is a large law firm catering to corporate clients. It has offices worldwide handling claims in many different fields including Labor Law, Social Security, Corporate Law, Tax Law, Foreign Trade, Civil Law, Intellectual Property, Banking Law, Stock Market and Administrative Law.
Excerpts from Corpusiure 's May, 2011 special report on Coca-Cola in Mexico:
Report: "The Coca-Cola Company Investigated for Tax Evasion."
"Recently, it has become common practice to establish and run "payer" companies. These are associations that are constructed either with the sole objective of evading payment of labour and tax benefits or associations that are formed to lighten the commercial responsibilities of companies with numerous suppliers, disconnecting them from the headquarters, which evidently holds the necessary capital to comply with said obligations. They create simulation schemes to elude compliance with labour, tax and commercial obligations, among others...
"The Tributary Administration Service, upon request of the Secretariat of the Treasury, is carrying out an investigation into the tax evasion of The Coca Cola Company in Mexico regarding three of its subsidiary companies: The Coca Cola Export Corporation, the "payer" company Integrated Administration and Senior Management Services (SIAAGSA) and The Mexico branch Coca Cola Export Corporation.
"The present investigation arose in response to the complaint filed by the ex-director of market development, Angel Alvarado AgŁero, who has spent four years seeking to prove the fraud incurred by The Coca Cola Company in Mexico, to the detriment of its employees, the treasury and the Mexican Institute for Social Security (IMSS)...
Not Part of Corpusiure report. By Yoximar
"In 1987, The Coca-Cola Export Corporation (CCE), subsidiary of The Coca-Cola Company, the largest soft drinks producer in the world and its branch in Mexico, of the same name, created an association named Integrated Administration and Senior Management Services (SIAAGSA), with the aim of leaving the latter in charge of hiring staff, salary distribution, payroll, as well as taking care of the benefits of this company's staff.
"That is to say that Coca-Cola Export has been simulating a scenario before its employees claiming that the true boss is SIAAGSA, an association created by Coca-Cola Export exclusively as a way of avoiding payment of PTU (Employees Participation in Utilities), salaries and other benefits, which legally correspond to the employees of Coca-Cola. The only real activity carried out by SIAAGSA is that of the "payer" company for The Coca-Cola Export Corporation.
"Therefore, in the case of the ex-director Angel Alvarado AgŁero, Coca-Cola Export's defence has been to deny any working relationship between the two, claiming that the latter was never a Coca-Cola Export employee, but rather a SIAAGSA employee. The above has clearly displayed the simulation incurred by The Mexican branch Coca-Cola Export Company, given that this company technically does not have employees and consequently does not distribute utilities, pay taxes or fees to the IMSS (or does so to a minimum)...
"By being legally unconnected to the company the employees do not benefit from the real utilities of the company, rather they receive those generated by SIAAGSA, which for tax and labour purposes is not linked to Coca-Cola Mexico. However, incidentally the latter is the SIAAGSA's only client and is run by the same executives as the soft drinks producer. It is for this reason that the Secretariat of the Treasury, the IMSS and the employees see very little of the money that would in reality be around 700 million dollars in utilities obtained by Coca-Cola per year in Mexico...
"As you can imagine the estimated contingency in these circumstances for The Coca-Cola Export Corporation is considerably high given the transnational's copious utilities and the fact that the employees that continue to work there could demand PTU payment for all the years that they have been working for the aforementioned company.
Despite the above and the investigation into the company in our country, the president of The Coca Cola Company, Muhtar Kent, denied on April 27th, before the Annual Shareholders Meeting, that they are under investigation for tax evasion.
Felipe Gomez Mont, Angel Alvarado's lawyer in Mexico assured the magazine "Proceso" that the case remains open with a number of legal authorities in Mexico given that the scheme used by Coca-Cola has fraudulent implications in terms of labour, tax, legality and administration, amongst others. Additionally, he disclosed documents that prove that the Treasury received the complaint and found in its preliminary legal analysis elements with which to take legal action before the Attorney General's Office for tax fraud that may reach 70 million dollars per annum. Therefore, if the accusations of fraud held against Coca-Cola were found to be true, the company would lose a figure ranging in the billions...
"Currently the Tributary Administration Service and the competent institutions belonging to the Federal Tax Attorney's Office within the exercise of their verification faculties are reviewing papers, interrogating officials, verifying the functioning of electronic systems and registers and in general they are putting the magnifying glass on Coca-Cola in all areas relating to tax and fee payments to the IMSS. In this way the Tributary Administration Service is reviewing inside out the SIAAGSA and Coca-Cola in Mexico, and the Federal Tax Attorney's Office is gathering elements to carry out proceedings against them.
"As we have already mentioned, it is currently common practice for companies to create their own businesses with the sole purpose of transferring their staff and productive activity, in order to disassociate themselves from salaries and benefits, and minimise their obligations with treasury, the IMSS, the INFONAVIT (National Trust for Workers Housing), amongst others, given that in theory the headquarters do not have employees, or have very few.
"There is no doubt that for the earlier mentioned labour trial purposes, The Coca-Cola Export Corporation must be considered as largely responsible. Therefore, the utilities generated by them are those that must be taken into account in order to order the PTU payment, and not those of SIAAGSA. On the other hand, from a tax and penal point of view, it could be said that The Coca-Cola Export Corporation has been committing the crime of tax fraud by using a simulation to omit payment of contributions, to the detriment of the federal treasury.
"We consider that the present matter shall set a fundamental precedent, therefore we invite companies to avoid simulation of legal acts that put their functioning at risk and produce contingencies that otherwise would be avoided."
An image posted on Facebook reflects the negative sentiment Coca-Cola is facing.
Coca≠Cola might be famous for spreading messages of joy and peace, but in Vietnam, the world's largest beverage company is being accused of contributing to the suffering of medical patients via tax evasion.
In an effort to do damage control over serious charges of tax evasion in Vietnam, two high-ranking Coke executives went to Vietnam to try to explain away charges of false accounting, transfer pricing and tax evasion.
Why would anyone believe what the two multi-millionaire executives, Irial Finan, Executive Vice President, and Clyde Tuggle, Senior Vice President and Chief of Public Affairs and Communications, have to say. Coca-Cola lies about everything that in any way raises questions about the company's crimes and other misconduct whether it be tax evasion, complicity in violence and murder against Colombian and Guatemalan union leaders and family members, cheating Mexican workers and the Mexican government out of hundreds of millions of dollars or that their beverages are healthy and promote happiness.
These articles make it clear that Vietnamese authorities do not find Coke's efforts to hide from charges of tax evasion believable:
Vietnam: "Vietnamese boycotting Coca-Cola on the suspicion about transfer pricing," Vietnam.net, May 6, 2013
The information that Coca-Cola has not paid any dong [Vietnamese money] in tax over the last 10 years of operating in Vietnam has raised a wave of anger among Vietnamese.
" 'I have decided not to drink Coca-Cola any more. I feel I need to do so. We should not accept an investor who enriches in Vietnam, but does not pay tax to Vietnam,' a doctor wrote on his Facebook.
"In fact, Coca-Cola has fallen under suspicion of evading tax for the last many years because it has been continuously declaring loss over the last many years, since the day it began operation in Vietnam...
"It is estimated that the sum of tax evaded by Coca-Cola over the last 10 years may reach trillions of dong, because Coca-Cola is holding the biggest drink market share in Vietnam with very big volumes of products consumed every year. [One trillion dong = $47,652,766]
"Vo Duy Khuong, Vice Mayor of Da Nang City, in an interview given to Tuoi tre newspaper in January 2013, said, that he frankly said to Coca-Cola's representative at a meeting that the city's authorities won't let it expand business in the locality because of the behavior of conducting transfer pricing, that makes the city fail to collect tax from enterprises...
"Meanwhile, local newspapers have found out that Coca-Cola still has not used up the land area of 40,000 square meters allocated to it before, but it still demands more land.
"The refusal by the Da Nang City's authorities has been applauded by the public. People believe that this is a necessary treatment to the investors who only try to make profit for themselves and ignore their duty of paying tax."
Vietnam: "Why consumers in Vietnam are calling for a ban on Coke," TrendWatching.com/Campaign Asia-Pacific, By Byravee Iyer, May 28, 2013
"A video released earlier this year, part of a boycott campaign against the beverage company, tells the story of a young girl suffering from leukemia. Her health insurance doesn't cover medical expenses, and she cannot afford adequate care because companies like Coca-Cola won't stop evading tax, according to the widely shared video."
In our newsletter dated June 30, 2011, we reported that we had been contacted by a Philippines group involved in a province-wide boycott of Coca-Cola because of the company's smuggling and tax evasion schemes which they said was destroying the local economy, local jobs and local businesses.
On May 29, 2011, Batang Negros explained to us that they were planning a province-wide boycott of Coke products. They said that Coke is involved in technical smuggling that will kill the local sugar industry.
"As you may know, our province is very well-known as the sugar bowl of the Philippines and is very dependent on sugar industry...and recently, government agencies have found out that Coca-Cola has been deceiving them by importing millions of kilos of sugar... intentionally labeled as pre-mix sugar by coca-cola to escape from sugar tariff. This has been the cause why the sugar economy has been going down and definitely this will kill not only the planters and sugar workers, but the whole province as well...
"Our main goal is to make Negros Occidental a Coke-free province, which is tantamount to a people's embargo...to pressure them to stop deceiving the people and adopt ethical trade practices, including dealing with their employees fairly...
"I hope we can work together to stop this monster in further destroying our future...thank you!"
Many establishments and businesses joined the campaign to boycott SMUGGLER and TAX EVADER Coca-Cola. The Facebook Page listing these "Coke-FREE Establishments".
"Coke's Crimes in The Philippines": http://www.killercoke.org/crimes_philippines.php
"Negros folks press Coca-Cola to use local sugar [instead of smuggled sugar]" By Carla P. Gomes, Inquirer Visayas, June 22, 2011
Facebook page for "Coke-Free Negros": http://www.facebook.com/pages/Coke-FREE-Negros/231682936848525
"About 4,000 Negrenses staged a protest in front of the Coca Cola Bottlers Philippines Inc. bottling plant in Barangay (village) Mansilingan, Bacolod City, Wednesday morning to protest the company's use of imported [smuggled] instead of locally grown sugar."