NEW YORK - McDonald's Corp. plans to issue a new apology and pay $10 million to vegetarian and religious groups for using beef flavoring in its French fries, in a proposed settlement of lawsuits charging that the company had misled consumers.
According to a draft settlement provided to Reuters on Thursday, 60 percent of the payment would go to vegetarian organizations, with the rest going to groups devoted to Hindus and Sikhs, children's nutrition and assistance, and kosher dietary practices.
The world's biggest restaurant operator would also pay an additional $4,000 to each of 12 plaintiffs in five separate lawsuits, which claimed McDonald's wrongly described the French fries as vegetarian.
McDonald's issued an initial apology last year for causing any confusion over its use of beef ingredients in French fries sold in the United States and some other countries.
However, the offended groups said the apology did not go far enough, arguing that when McDonald's said it had switched to vegetable oil to cook its fries in 1990, many people assumed that the food was therefore suitable for vegetarian diets.
Under the proposed settlement, McDonald's would publish a more detailed apology on its Web site and other publications, and convene an advisory board to advise it on vegetarian matters, according to the draft document.
When McDonald's disclosed last year that it used beef tallow, it led Hindu groups to attack a McDonald's in Bombay, India. However, the company has said it does not use any beef ingredients in its Indian products.
"I'm not happy with the $10 million, and wish I could do better in terms of money. But our focus was to change the fast food industry, and this is a big victory for consumers in this country because we've brought this giant to do this," said Harish Bharti, a Seattle-based attorney who filed the first lawsuit against McDonald's on behalf of 16 million Hindus and vegetarians last May.
A settlement is believed to be imminent, with both sides working on the final documentation that will need to get court approval, said Bharti.
In the latest apology, McDonald's will say it "sincerely apologizes to Hindus, vegetarians and others for failing to provide the information they needed to make informed dietary decisions" in its U.S. restaurants, said Bharti.
McDonald's said it was premature to discuss details before an official settlement. "McDonald's has been working in good faith to resolve this matter and publicly apologized last year for any confusion we may have caused," said a spokesman.
The five lawsuits over beef-flavored fries were filed last year in Washington, California, Texas, Illinois and New Jersey. The proposed settlement is a master settlement agreement, which would control the terms in all pending cases and protect McDonald's from further liability from lawsuits arising from beef-flavored fries.
McDonald's shares ended Thursday down 1.14 percent, or 32 cents, at $27.74 on the New York Stock Exchange . They have gained about 5 percent so far this year, compared with a slight drop in the Standard & Poor's 500 Index <.SPX> .