Investigation finds decades-long illegal deal at Georgia Tech

ATLANTA — An investigation by Channel 2 Action News and our investigative partners at the Atlanta Journal Constitution and AJC.com has found that Georgia Tech repeatedly gave Coca-Cola exclusive rights to sell on the Tech campus without giving other companies a chance to bid.

Tech emailed Channel 2 investigative reporter Richard Belcher to acknowledge that the deals were improper and the latest deal has been ended.

Another problem is that most, if not all, of the millions of dollars that Coke has paid went into accounts controlled by the Georgia Tech Foundation not the university. The foundation has fewer controls on spending than the controls that govern spending at the public university.

In its statement today, Tech acknowledged that the deals going back to 1933 should have been competitively bid and will be in the future, and the money should not have gone to the Tech Foundation.

Georgia Tech was founded in 1899, seven years after Coca-Cola. Today, they sit right across from each other on North Avenue. Our investigation found that the series of sponsorship agreements involving Coke products on campus was too cozy and almost certainly illegal under state procurement rules.

The state requires competitive bidding on most purchases, unless there is a written justification for the no-bid arrangement. There is nothing in writing to support the so-called “campus pour” agreements with Tech.

Tech spokesman John Toon emailed, “There is no record of such an authorization. The contracts signed in 1993, 2000 and 2008 were, at the time, viewed as an extension of previous agreements. They should have been competitively bid.”

Toon says Tech President G.P. “Bud” Peterson was made aware of the current (2008-2021) deal in August.

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In an Aug. 8 emailed obtained by Channel 2 through the state open records law, Tech's then-chief legal counsel, Patrick McKenna, wrote, "There are issues with the sponsorship agreement…Our recommendation is that the current agreement be terminated and consideration be given to whether or not to go through an appropriate process for a new sponsorship agreement."

State Sen. Fran Millar, R-Dunwoody,told Belcher, “There doesn't seem to be any justification in the file and which you have right now of why it was made a sole-source contract, so I think the attorney is absolutely right. It probably has to be bid at this time.”

Under the current agreement, we calculate that the Coca-Cola Company and Atlanta Coca-Cola Bottling were to pay Georgia Tech or affiliated groups $4,566,033. But instead of going to the university, the money has been going to funds governed by the quasi-private Georgia Tech Foundation.

About those payments, the chief legal officer wrote in his Aug. 8 email “That is not permissible."

Georgia Tech says Coke is no longer making payments under the 2008 agreement, and the university will re-bid the next “campus pour” agreement.

Among the non-university funds which were receiving money under the 2008 deal was the President’s Fund, over which Peterson has virtually total control. The agreement called for total contributions of $560,169 to that fund over the life of the deal.

Tech says all future income from a new agreement will go to the university.

"You’re going to find some other things like this. I'm sure there are. And the big question is: If you see it in one college or university, we just need to make sure it isn't happening somewhere else," Millar told Belcher.

Millar says he has confidence in Peterson, University System Chancellor Steve Wrigley and the Board of Regents to ferret out other such illegal deals.

The revelation of the long-running Coke agreements follows a difficult few months for Georgia Tech. Five senior administrators at the university or the Georgia Tech Research Institute have either been fired or resigned since late May.

The director of the research institute left in early June after Channel 2 reported that he had authorized $1 million in so-called morale spending for employee entertainment.

Wrigley publicly rebuked the Tech president, who has promised to make several changes, including the creation of a position for a campus-wide ethics officer, who will report directly to the president.

Tech’s internal auditor also now has direct access to the president.

Late Monday, a Coca-Cola spokesperson sent Belcher the following statement:

“The Coca-Cola Company has a long history of supporting colleges and universities around the country, including athletics, academic scholarships and other programs that enable universities to improve on-campus experiences for their students and fans. In exchange for our support, we are able to use university trademarks in various marketing activities and universities are able to use the sponsorship funds they receive in whatever way they find most beneficial to their campuses.

We follow the bid process established by each of the universities we serve, and we look forward to working with Georgia Tech in this process.”

Cox Media Group