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 user 2008-06-10 at 11:11:18 am Views: 57
  • #20082
    State probes Office Depot pricing
    June 2008DELRAY BEACH — Florida’s attorney general is investigating Office Depot Inc. for alleged “bait-and-switch” tactics in its office supplies contract with state and local agencies.The central allegation: Office Depot bid low but sold high. The state is looking into whether the company offered low-price items in its contract but later sold higher-priced alternatives.

    Contract controversy
    Five states have put their office supplies contracts with Office Depot Inc. under the microscope.

    North Carolina: In May 2007, the state auditor reviewed its contract with Office Depot and found pricing errors. In response, Depot credited the state about $41,000.

    Georgia: The state canceled its $40 million, 11-month-old contract with Office Depot in February, saying the retailer frequently mispriced items. An analyst hired by independent office products dealers estimated that the state was overcharged by more than $1.2 million; an auditor hired by the state said the errors totaled about $200,000.

    California: State officials launched an audit in March in response to concerns that the state was overpaying. State legislators questioned company executives last month about the concerns.

    Nebraska: The state auditor said in April that Office Depot had overcharged by as much as 400 percent on some items. The state is seeking new bids for its office supplies contract.

    Florida: The attorney general is investigating concerns raised by a former Office Depot employee accusing the company of “bait and switch” in its contract with the state.

    What are these?
    The civil inquiry comes on the heels of similar investigations in at least four other states where auditors have questioned the Delray Beach retailer’s pricing, citing frequent overcharges for pens, envelopes, scissors and other supplies.”The Office Depot investigation is active and ongoing,” said Sandi Copes, spokeswoman for the Florida Attorney General’s Office. “We investigate when we believe there may be violations … particularly when there is a discernible pattern of alleged behavior that would violate the law.”Office Depot spokesman Brian Levine said Friday that the company would cooperate with any state agencies if asked. He called the pricing allegations “baseless,” citing a “tremendous amount of misinformation.”"We work very hard each and every day to ensure that we are fully compliant with our contractual arrangements, and we pride ourselves on our commitment to pricing integrity,” Levine wrote in an e-mail.

    At issue is Office Depot’s four-year contract with Florida worth a potential $180 million. There is no guaranteed dollar value in the contract but sales totaled $46 million in 2007, the first year of the agreement, said James Miller, a spokesman for the state Department of Management Services. That includes sales to state offices, cities, counties, airport authorities and other government agencies.The attorney general’s inquiry was prompted in part by complaints from a former Office Depot employee who managed government contracts for the retailer for 11 years.David Sherwin of Fort Myers, a self-described whistle-blower who says he was fired in April when he took his concerns to management, has sent information to local, state and federal officials alleging that the retailer has fraudulently overcharged more than 500 government agencies by millions of dollars over the past several years.

    Sherwin is not the first to question the firm’s contracts.
    Auditors in four states have examined Office Depot’s pricing practices. North Carolina got a $41,000 refund; Georgia canceled its contract; California legislators have questioned company executives; and Nebraska is seeking new vendors, saying the state may have been overcharged by as much as 400 percent in some cases.Levine said each contract is different, and that refunds and audits are part of the “ordinary course of business.”

    In Georgia, a group of mom-and-pop office products dealers claimed Office Depot bid low to secure the lucrative contract, then charged more through price increases or product substitutions.The independent dealers hired consultant Rick Marlette to analyze the firm’s contracts in Georgia and California. Marlette, a pricing analyst for the office products industry based near Atlanta, found more than $1 million in mistakes in each state.Perhaps the most egregious example cited in his report: Office Depot priced a pair of 8-inch stainless steel scissors for 15 cents in its Georgia bid. The company later sold those scissors to the state for $4.”There was no way you can sell merchandise at the prices they were bidding and make a profit,” said Marlette, adding that wholesale cost of those scissors is around $2. “We felt they never had any intention to honor those prices.”Marlette’s conclusion that Office Depot overcharged Georgia by $1.2 million was only partly upheld by the state’s own inquiry, which found $200,000 in overcharges.”The states have to take responsibility in this as well because they allowed a lot of this to happen,” Marlette said. “No one ever looked at it.”Office Depot executives have dismissed the mounting criticisms as unfounded. Company executives said in April they were reviewing their 19 state contracts and working with state officials to resolve any concerns.
    New details on overcharging allegations against Office Depot
    Lee County – New details on a story that WINK News brought you back in April, about allegations of Office Depot overcharging our local governments by hundreds of thousands of dollars. Details of those accusations will soon go to the Office of the Attorney General in Fort Myers.”My report that I have is about 230 pages right now,” said former Office Depot account manager, David Sherwin.

    Sherwin is planning to present that report and give an investigative statement Tuesday, at the Office of the Attorney General in Fort Myers.”The specifics, the elements of the crime and who specifically in Office Depot has evidence that should be subpoenaed, which people have actually committed fraud or obstruction of justice,” said Sherwin.Sherwin claims the office supply company has overcharged both local and county governments for years. For example, Sherwin says with the Lee County School Board – over a three year period – the alleged amount of fraudulent overcharges ranges from $375-750 thousand.In a written statement provided by Office Depot – the company maintains the “allegations are baseless” and “we pride ourselves on our commitment to pricing integrity.”But several government agencies here in Southwest Florida have been looking into overcharging, such as the Lee County Clerk of Courts and the Collier County School District. The accusations have also stretched to several other states, including Georgia.As for Sherwin’s upcoming statement, Office Depot statesthey can’t confirm who their ex-employee has contacted, but they “consistently cooperate with all regulatory and legal agencies.”Sherwin however says this meeting is crucial.” This is the most important step within the State of Florida,” he added.