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 user 2008-06-10 at 11:12:08 am Views: 75
  • #20333
    State probes Office Depot pricing
    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.

    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

    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?
    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.
    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
    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.