Coca-Cola may be making noises in the UK to cut down its branding and marketing of caffeinated sugar water to children, but in the US they are steaming full bore ahead like a schoolyard bully. The "pouring rights" contracts at public schools are not just incredibly bad policy, but they have been challenged as unlawful.
In the US, there is a widespread perception that government in New York State is dysfunctional. New York State Attorney General Eliot Spitzer, candidate for Governor, recently used his bully pulpit to criticize gifts to politicians and the lobbying by those politicians on state contracts. But his effort was too little, too late.
Internal documents produced pursuant to the state freedom of information law in dribs and drabs -- the most recent produced this past week -- confirm that Coca-Cola's political influence -- wielded through the clout of a politician named Michael Bragman -- was the key to overcoming New York State Education Department's objections to a "pouring rights" scheme.
Such a scheme promotes caffeinated sugar water to a captive audience of schoolchildren. The NYSED then provided the so-called "Model Agreement" drafted by Coca-Cola to any District that asked -- with it advertised in the trade press.
Such agreements seek to shape and even "brand" a person's beverage choice for life. The contracts are not only bad policy, they are illegal.
In the face of initial legal objections by the staff of the State Education Department, powerful Majority Whip Michael Bragman wrote:
"I am proud of the fact that I am one of your strongest allies in state government."
"I must tell you, however, that I am having serious doubts about our partnership. At issue is the adversarial role SED has taken with regard to the proposed agreements between Liverpool and North Syracuse Central School Districts and the Coca-Cola Company."
"It is simply incomprehensible to me why SED would stand in the way of agreements ..."
Under the agreement, taxpayers contributed 92.5% to build the facilities in his district -- which then would be named after him.
He continued: "SED has advanced the argument that the proposed agreements somehow would set a dangerous precedent in New York. I find this position to be ridiculous. There is no threat to children from a pouring rights agreement."
He argued that "other companies, including IBM, Apple Computer Co., Nike, Adidas, Fila, Calvin Klein, Nestle and others -- have initiated agreements with schools that have resulted in much more obvious and aggressive product promotion that what is being proposed."
"Every time my staff and I try to address SED's concerns with facts such as these and with information regarding the compelling benefits of this project, we are met with new obstacles. I am becoming extremely frustrated...."
"The purpose of this letter to inform you that I would like to meet as soon as possible ..."
He had reason to be upset. Earlier in the day he sent the letter, NYSED Counsel had again requested the Minutes approving the contract, and related documents.
Later that month, on the day the School District finally faxed the required information, New York State Education Department Counsel Ahearn signed an Order To Show Cause that read:
"You are hereby directed to show cause pursuant to Education Law 310 why an order of the Comissioner of Education should not issue (1) declaring null and void the agreement entered into on May 11, 1998 between the Board of Education of the Liverpool Central School District ("respondent" or "district") and the Coca-Cola Bottling Company of New York, Inc. ("Coca-Cola"), for exclusive sale and distribution rights of Coca-Cola beverages on campus; and (2) enjoining the implementation of said agreement pending an ultimate determination in this proceeding.
"You are required to appear and an to answer the allegations contained in the annexed petition. Pursuant to 8 NYCRR 276.1(a), any affidavits in opposition to the proposed interim relief must be filed within three business days after the service of this Order to Show Cause and Petition. You must file a verified answer within 20 days after service of this Order..."
At a meeting held in Albany -- for which no records have been provided -- Bragman reportedly angrily demanded that the agreements be allowed. The District's counsel separately met with State Education Department Counsel Kathy Ahearn. Again, no records were provided and the Records Access Officer reports that the log that visitors are required to sign was destroyed.
Worse still, the NYSED has adamantly refused to produce the "Annexed Petition" incorporated by the Order to Show Cause signed by Kathy Ahearn on June 30, 1998.
After the intervention by Mr. Bragman, there was prompt approval of the scheme. Indeed, counsel in July took the North Syracuse agreement -- titled it a "Model Contract -- and then mailed the contract to Superintendents throughout the State. There was an accompanying memorandum that urged the School District to consult with an atttorney to ensure compliance with State Education Law, the State Constitution, competitive bidding laws, and applicable regulations. The significance of that advice was lost upon Superintendents who saw a so-called "Model Contract" being sent out by the state agency that had responsibility for ensuring its legality.
It was provided to the national education trade press (School Administrator, Nov 1998) and the address to request a copy of the so-called "Model Agreement" was provided in the article. The feature titled "Negotiating a favorable soft-drink contract" was by "Anonymous."
In New York the State treasury opened up -- providing many times in state taxpayer money the $900,000 paid up-front by Coca-Cola. The money was used to build a stadium that then was named after Mr. Bragman. It was state taxpayer money that built the complex that then served as the showcase nationally for what soda money could buy.
The real irony is that the reality has always been that just as much money can be made from the sale of healthy beverages. There was no need to sell out our kids.
Mr. Bragman also was associated with a controversy relating to a decision to grant exclusive right to develop the historic Erie Canal in New York State. Acting as a real estate developer, he obtained sub-rights from the businessman worth, in his estimate, many tens of millions. The real estate attorney representing Mr. Bragman in the "On The Canal" matter is the same attorney defending Coca-Cola in ongoing pouring rights challenges. Coca-Cola used Mr. Bragman's real estate attorney.
The manipulation of public taxpayer funds to provide pork barrel money, unfortunately, is something that is commonplace. Seldom, however, is it so blatantly at the expense of the health of our children and the rule of law.
The New York State Comptroller Carl McCall had concurrent jurisdiction over the legality of such agreements. Where was he during all of this? He was in boxseats at the basketball game -- in seats comped by the Coca-Cola Enterprises Vice-President Robert Lanz. Mr. Lanz oversaw the launching of the agreements and, according to the press accounts, negotiated the North Syracuse agreement.
In the Spring of 1998, McCall's office was involved in an ongoing audit of pouring rights agreements in New York State -- finding, for example, that Generally Accepted Accounting Principles were not being followed at the State University at Stony Brook.
There is no evidence that McCall's office joined the State Education Department in questioning these agreements at elementary, middle and high schools. He instead wrote a letter thanking the Coca-Cola Vice-President Lanz for the hospitality shown him and his wife at a March 8, 1998 game between the Knicks and Bulls. That was the very month the agreement was being negotiated.
When in the Fall 2002, it was pointed out that gifts in excess of $75 to a public official were illegal, his spokesman, as reported in the New York Post and Daily News, explained that he didn't think he needed to report the gift because he and the Coca-Cola Enterprises Vice-President were friends. His office quickly retrieved the letter from the state archives and it hasn't been seen since. The Government in the Sunshine Act in New York State has come to be under a dark cloud in New York State.
Coca-Cola Enterprises Vice-President Lanz was also a good friend of Michael Bragman, having been pictured some years earlier coming out of a luxury hotel in Puerto Rico in a Syracuse Post-Standard article. The story was titled "Secrets of the Chamber -- Whoever said there was no such thing as a free lunch." The Coca-Cola manager in charge of the agreements, William Wyrick ("Lucky") once said that whatever passed between Mr. Bragman and Mr. Lanz was out of friendship. According to a former Coca-Cola employee, regular deliveries of product were made to Bragman's home during the mid-1990s.
Someone should tell these public officials that the fact that they like the lobbyists who give them unreported gifts in excess of the statutory limit is irrelevant. We all like people who bestow gifts upon us.
Mr. Bragman had made Coca-Cola tens of millions when he was instrumental in eliminating a bottle tax. He no doubt was a personal friend of Robert Lanz and no doubt received all the Coca-Cola paraphanalia filmed in his office, and written about in the local paper, as the result of personal friendship or at market value. Someone should ask him. In the mid-1990s, according to a former employee, the Coca-Cola "Move Crew" would deliver items, including two vending machines that were no longer used in the trade, directly to his basement.
If you are not part of the solution, it very well may be that you are part of the problem. Just part of that problem is an obesity epidemic killings thousands each year. That especially applies to the NYSED withholding of the critical "Annexed Petition" addressing the legal issue.
And if you are not following the rule of law, and are giving unreported gifts to public officials, you probably have done something very wrong. That is, you've done something wrong totally apart and in addition to promoting caffeinated sugar water to the captive audience of school children.
Who is going to stand up for our children and put aside their financial self-interest?
When are elected and appointed officials going to start doing their job?
What was Coca-Cola's excuse more recently for giving the Governor of Arkansas Huckabee a canoe valued at $500? The Coca-Cola spokesperson argued that It had the Coca-Cola logo on the front and that it therefore just constituted free advertising.
According to excellent reporting by Scott Parks of the Dallas Morning News, Coca-Cola has paid a $6,000 stipend to the heads of the various groups of school administrators and even the CEO of the National PTA -- to serve on a council to promote these school partnerships. The head of a principal's organization wrote an Op-Ed lobbying against a soda ban in Seattle without mentioning that he was on a Coca-Cola-funded Council whose mission was to promote school partnerships. Instead, he listed only his title as head of the principal's organization.
Coca-Cola has contributed toward expense-paid junkets to scientists studying the effects of sugar -- and even journalists covering the issue.
This corporation, along with its affiliates, simply does not get it.
There are numerous legal problems with these agreements.
(1) The Education Law in New York expressly provides that to the extent the use is for nonschool uses and activities, the use must be "nonexclusive".
(2) There is a strong State public policy against the use of school property for commercial promotional activity in aid of a particular corporation. Under the state constitution, before a license to use school property is granted, there must be a full and fair opportunity to be compete. The opportunity for a beverage license may not be limited to companies that sell soda. Companies that sell healthful beverages -- and not soda -- must be allowed to compete. This is America.
(3) The State Constitution prohibits the gift or loan of public property to a private commercial enterprise absent a valid and substantial school purpose. A contract is unconstitutional where it is for nonschool purposes, notwithstanding a financial benefit. Summer soccer leagues and community groups using school property for nonschool purposes cannot be required to buy from a particular company.
(4) A long-term contract is illegal even if it permits a future boards to terminate upon payment of a penalty. The legal precedent clearly holds that a board may not impinge or fetter the exercise of discretion of a future board to go soda free. That rule is violated by a long-term contract or a provision that requires payment of a penalty in the event the school goes soda free.
(5) To the extent that a contract requires the school district to purchase any beverages for its food service program or other purposes, the contract must comply with any applicable competitive bidding mandates in General Municipal Law Section 103. The Commissioner in a 1976 decision (named EFM) found that the requirements of Section 103 could not be circumvented just because the food service contract was a revenue sharing agreement in the nature of a license. The Commissioner rejected the company's reliance on the line of precedent involving licenses on public property -- to do so, the Commissioner ruled, would thwart the salutary purpose of the competitive bidding law and the precedent of the highest court in New York State.
(6) Moreover, under the competitive bidding laws, a School District would have to show that a requirement that a vendor sell soda in order to compete to sell its product on school property was "essential to the public interest." Selling soda to kids is not essential to the public interest -- polls show that most adults agree that it is contrary to the public interest.
(7) A regulation in New York prohibits the electronic advertising on school property. (The six-foot high displays on the front of vending machines are electronically backlit). The parties need to switch to noncommercial signage, such as Coca-Cola acknowledges is available.
(8) A regulation in New York requires that physical education, health education and recreation be provided in an environment "conducive to healthful living." Selling soda to schoolchildren under the incentives of these "pouring rights" agreements is not "conducive to healthful living."
(9) The State Education Department has totally ignored and failed to enforce a procedural rule requiring that when a contract is challenged, the proposals submitted by the vendor be produced. Those proposals often would show that more than the $10,000 minimum in expenditures was contemplated (thus requiring competitive bidding under any interpretation of the precedent).
In short, if principles of good government were followed, the rule of law would be enforced and there likely would be good nutrition in our schools.
Eliot Spitzer has opted, in his own way, to be part of the solution.
But, ironically, who is arguing that deference should be paid to the state agency steamrolled by the powerful legislator friendly to Coca-Cola? Eliot Spitzer -- in his role as Attorney General charged with representing state agencies. Mr. Bragman was Eliot's biggest fundraiser upstate and at last report, had $800,000 to donate to some campaign.
No one ever said that vindicating the public interest and serving the public good wasn't sometimes a complicated proposition. Spitzer v. McCain for President in 2008. Now that would be an interesting election.
Ross E. Getman is an attorney who has brought an action in New York State that seeks to stop Coca-Cola's promotion of soda to schoolchildren through long-term exclusive contracts that are intended to prevent future boards from going soda-free.