Category: Big Box News

Big Box Watch: Detroit latest to file Office Depot complaint

Posted on by chase

I’m actually amazed it’s been this long since we had some new Office Depot news, but of course, when it came it was not surprising. The Detroit Public School system is the latest to accuse Office Depot of overcharging on their contracts, as reported by the Detroit Free Press:

The Detroit Public Schools chief investigator is researching allegations that its office supply contractor, Office Depot, overcharged the district over the past three years.

The company is already under investigation in several other states and, according to the whistleblower, agreed to repay the city of Berkeley, Calif., approximately $289,000 after that city’s officials uncovered overcharges spanning the past 3 years.

DPS Inspector General John Bell contacted the whistle-blower involved in the Florida investigation immediately upon learning of this alleged scheme Monday, said district spokesman Steve Wasko.

“We are looking into its impact on DPS,” Wasko said Monday evening.

Office Depot released a statement today by email denying allegations that the company overcharged the Detroit Public Schools.

“Office Depot enjoys a good relationship with Detroit Public Schools,” spokesman Jason Shockley said. “We are not aware of any complaints from the Detroit Public Schools regarding overcharging and we have no reason to believe we have been overcharging them.”

This is one of the times where this news has really hit home to me. Everyone likes to think of the big bad government sitting around all rich and corrupt, so who cares if we overcharged them a few pennies?

Well, I lived near Detroit for a long time, and had friends go through the DPS, some as students and some as teachers. These schools need every penny they can possibly get, and to try to overcharge them for the basic necessities of pencils and paper is just despicable.

Hopefully it won’t be much longer before I get to report that Office Depot has finally collapses under all of this wrongdoing, and we can just put the whole mess behind us.

Big Box Watch: Companies want tax refunds to cut losses

Posted on by chase

According to CNN.com, many large companies, inluding Office Depot and International Paper Co., are lobbying to revive a campaign to get refunds for taxes paid as many as five years ago, as losses mount.

At issue is a proposal to allow companies to use 2008 and 2009 net operating losses (NOLs) to get refunds for taxes paid as far back as 2003. Current law allows only a two-year carryback of those losses.

“The NOL provision is the strongest tool you can provide to help companies in a broad cross-section of industries weather the current economic conditions,” the CEOs wrote to lawmakers.

“It will allow businesses to meet payroll, retain their work force, help avoid additional layoffs and stabilize the business environment,” they wrote.

So basically, a lot of large big-box companies are in such deep trouble that they’re looking to extend the rule (which allows you to seek reimbursement for taxes paid up to two years ago) to go back FIVE years to try to cover their ever-expanding losses. I’m all for economic stimulus, but I’d like to think that there must be a better way to “meet payroll, retain workforce, avoid layoffs” and so on. In Office Depot’s case it’s especially hypocritical; they ask for government assistance with one hand and engage in all kinds of shady dealings with the other. Try offering value to your customer and provide a fair and honest work force, and I doubt you’d have all these money troubles. Seems to work for us.

NOPA Urges Governments to End Sole-Source Contracting

Posted on by chase

In light of recent allegations of big-box retailers abusing their stranglehold on government contracts, the National Office Products Alliance (NOPA) has put out a statement calling for an end to single-source contracts with state and local governments. The statement was triggered by an announcement to local government customers that, effective approximately March 30, nationwide pricing of office products under the “U.S. Communities” contract would be changed across-the-board without input from local government customers. According to the NOPA press release:

NOPA contends that more competition is essential at the local government and school district levels to ensure consistent delivery of “best value” and help government customers avoid the need for costly, time-consuming and sometimes embarrassing audits of their office product purchases. “Regrettably, such competition has been lacking and the growing number of public audit findings indicating non-compliance with contract pricing and product purchasing requirements should be a major concern,” said Chris Bates, president of NOPA. “In several cases, state and local governments have been refunded public funds that their audits determined were due.”

This sort of day-to-day competition would not only close the door on single companies that seek to abuse their contracts, but open a new one for smaller, independent retailers to get their products in the hands of those who need them. More competition leads to better value for the buyer, and more opportunities for the seller. It’s a win-win situation, and one that’s been a long time coming.

Big Box Watch: Ex-Office Depot Worker Speaks Out

Posted on by chase

A CBS2 investigative report has an interview with former Office Depot manager Ed Kurkurian, who was fired for following orders handed down from his superiors to lie to customers about laptop availability. Despite initially not talking to the investigators who came to his store looking for evidence of misconduct, Kurkurian was later fired, with Office Depot saying he was to blame for instructing salespeople not to sell computers without warranties.

Kurkurian gave the interview to clear his name and set the record straight about Office Depot’s policies:

…Kurkurian reveals what he says was the company’s secret policy. Designed to get consumers to buy expensive extras on computers. One he says was handed down from his district manager to some Office Depot stores in Southern California.

“What specifically did he tell you to do?”

“Go ask questions and ask if they want a warranty. If customer doesn’t want a warranty, go in back and pretend like you’re looking for computer and come back and say no. We’re out of stock.”

“That’s lying to the customer?”

“Yes.”

Despite the truth of these accusations already being revealed by an undercover report, it’s pretty damning to hear it straight from an ex-employee’s mouth. Though there will surely be those who accuse him of using this as an opportunity to “get back” at his former employer, the fact that independent investigations have found evidence of similar wrongdoing at stores accross the country lead me to believe that Kurkurian is telling the truth. Shame on you, Office Depot. Maybe there’s a reason your stores are “like ghost towns”. No one likes a crook.

Big Box Watch: Story of a Whistle-Blower

Posted on by chase

Naples News has an incredibly in-depth article on the story of David Sherwin, who blew the whistle on his previous employer, Office Depot, for allegedly overcharging millions on government contracts.

David’s story is interesting not only for the facts he presented, but the way in which he presented them. Not knowing the best way to put forth his beliefs of the company’s wrongdoing, David ended up sending an explosive letter that cost him his job and downplayed the credibility of his accusations (warning, mild foul language):

What would become his resignation letter, the caustic e-mail, stared at him from the computer screen on his kitchen counter, near a half-drunk bottle of Smirnoff. The vodka helped him escape the obvious: don’t send it.

“I would kick your ass so hard that you would fly across Florida like Tinkerbelle,” read a part of the message, a “Reply All” with company Chairman and Chief Executive Officer Steve Odland as the intended recipient.

This, Sherwin said, was his breaking point. He wanted out of Office Depot.

“I actually had the e-mail sitting on my computer, I remember, for probably two hours, staring at it, and I would walk around the room,” Sherwin said. “I would get madder and madder and madder, and then I would take another shot of vodka, stare at it and scowl at it.”

As Sherwin paced, he passed plaques, certificates and photos on his walls and refrigerator — reminders of his successful law enforcement career.

“And then, finally, I just said screw it and I just hit the send button,” Sherwin said. “And at that point in time, I knew it was no turning back.”

Office Depot fired Sherwin a day later for, “workplace misconduct.”

While the entire article is worth a read, I found it particularly great how the story captured the emotion inherent in making such a difficult decision. It also highlights Sherwin’s career as an administrator and investigator, skills which would have made him the perfect whistle-blower had it not been for his ill-fated delivery of the news.

“Because I more or less had a mental snap, I didn’t think things through. Had I thought things through, I would have waited a couple weeks,” Sherwin said. “I would have actually gone to the Attorney General’s office as an employee and they probably would have kept me on, had me wired and stuff like that. But for somebody who did this precipitously, I was able to eventually gather up enough information for them to believe me.”

Regardless of his initial explosion, Sherwin has worked tirelessly to bring word of Office Depot’s misconduct to anyone who might have been affected. Working out of a home office, he sends out emails and is in touch with representatives from all 50 states, 700 countries and numerous government agencies, and he’s not stopping until his story gets out.

“Almost every day he turns around to me and he says, ‘Do you think Office Depot realizes that I’m not ever going to stop and that I’m going to continue until somebody’s in jail or they’re out of business?,’” (Sherwin’s friend Brett) Vining said. “And I keep saying, I say, ‘Yeah, I think they’re getting the idea now, David. I think they’re finally getting it.”

If the number of stories filling my inbox every day is any indication, we’re getting it too, David. Keep fighting the good fight.

Big Box Watch: Berkeley seeks reimbursement for alleged Office Depot overcharging

Posted on by chase

As reported earlier, Berkeley, CA has accused Office Depot of overcharging the city over a quarter of a million dollars for office supplies. According to the Berkeley Daily Planet, City Manager Phil Kamlarz has asked for a return of the money.

The article goes on to state that while Office Depot has only issued a standard “we are looking into the matter/taking it very seriously” form letter, Berkeley is by no means the first to find itself in this situation:

• Following a state audit last year, Office Depot agreed to reimburse the state of California $2.5 million for overcharges incurred during a two-year period of $57 million in state office supply purchases.

• A 2008 North Carolina state audit concluded that Office Depot had overcharged North Carolina state agencies by more than $294,000 over a six-month period. Among the charges in the state audit was that the company inflated base retail prices on the bid so that it would look like it was offering a higher discount than it actually was, included unauthorized items in shipments during the course of the contract, and switched brands so that the value of the products shipped to North Carolina was less than what was contracted and paid for. In a prepared news release, North Carolina State Auditor Leslie Merritt said that “There are numerous reports that Office Depot has engaged in a pattern of overcharging and violating state contracts in Georgia, California, Nebraska, Florida, and now North Carolina.”

• Last year, Nebraska State Auditor Mike Foley found that Office Depot overcharged the state as much as 400 percent ($1.06 for staples that were supposed to be bought for 21 cents, for example) on purchased items included in the state’s $3 million per year, three-year contract with the company.

• Also in 2008, the state of Georgia terminated its $40 million per year office supply contract with Office Depot over charges by state officials that the company “repeatedly overcharged and mispriced items for state employees,” according to the Atlanta Journal-Constitution.

• Earlier this year, the Missouri attorney general’s office began an investigation into allegations that Office Depot had overcharged government agencies, nonprofit agencies and charitable groups in that state by using “bait-and-switch” tactics.

So while this article is not really an update to the ongoing investigation (other than the City Manager’s public request for repayment), it goes a long way to highlighting some of the previous allegations and shady dealings that Office Depot has been involved in.

What I find morbidly curious is that this article appeared in my inbox right alongside a notice that Office Depot has opened a new “Caring Connections” website to help teach people about volunteerism, citing the Office Depot Foundation’s previous work providing college supplies to foster kids. While I’ll never turn my nose up at a charitable action that actually helps people (the kids got their school supplies, and were better off for it), it seems like parading it around now during a time of inter-company crisis is a cheap PR move. Maybe they can wrangle up some volunteers to help them pack their bags when this whole mess is over.

Big Box Watch: Office store stock “uncertainty” on the rise

Posted on by chase

A recent article by Morningstar has listed their appraisal of OfficeMax stock to an uncertainty level of “extreme”. In a quote that I feel is only good news for online retailers and the end-user consumers, Morningstar said:

Office supply retailers have been disproportionately impacted by the current economic downturn as well as mounting competition from mass merchants and online retailers. In our view, an industry shakeout is inevitable, and it is unlikely that all three office supply superstore chains will survive in their current form.

And while they feel that Staples may be the best positioned to survive the economic storm, given their greater geographic reach and availability of online options over the other two big-box names, they went on to state:

…It is not immediately apparent whether OfficeMax or Office Depot (if either) is better-positioned to weather a severe economic downturn. Both firms carry heavy debt burdens on their balance sheets, and with few indications of an imminent pickup in office product sales, we expect free cash-flow generation to be increasingly difficult over the coming years.

I think this sort of uncertainty is definitely not a new concept, and is certainly being felt across the industry. The availability of quality online alternatives to big-box retailers has been chipping away at their stranglehold on the market for several years, and coupled with the downturn in the economy and stories of impropriety, consumer faith in the office megastore is at an all-time low.

To be fair, these businesses have no one to blame but themselves. They’re clinging to an outdated business model in a time where people are looking to move forward. Office supply sales is an old industry, but that doesn’t mean it needs to keep a death-grip on old ideas. Guess what, guys? Turns out if you provide good, lasting value to your customers, stock the inventory they want at a price that is reasonable and appealing, and deal with them in a friendly manner, your business ends up doing just fine. Who’d have guessed?

Big Box Watch: Office Supply stores hit hard by recession

Posted on by chase

Just browsing the big-box news and came across an article by Tribune Media Services columnist Andrew Leckey. While the bulk of an article relates to his personal encounter with a big-box retailer (describing it as “a ghost town”), he has some eye-opening facts at the end of the piece:

Financial results underscore a brutal economy and industry in transition:

— Staples’ net income dropped 14 percent in its fiscal fourth quarter ended Jan. 31. It suspended its store remodeling and is looking toward smaller stores.

— Office Depot is closing 112 under performing North American stores, reducing by half its new-store openings and closing six distribution centers. Including substantial charges, it had a $1.54 billion net loss in the fourth quarter.

— With charges, OfficeMax had a net loss of $396 million in its fourth quarter, suspended its quarterly dividend, eliminated jobs and delayed store remodeling.

The thing that I always notice when people are making these doom-and-gloom predictions for the office supply industry? They always seem to be referring to brick-and-mortar stores. First it was the big-box stores pushing out local enterprise, and now it’s those very same big-box stores crumbling in the bad economy. No one seems to mention that the new face of office supplies has been online retailing for quite a while now, and people looking to improve their office-supply experience only need to look as far as their computer.

This doesn’t help all those big-box retailers, of course, and I’m sad for the people who are losing money when office store stock crumbles. But for the average consumer needing office supplies, the future’s never been brighter.

Big Box Watch: Office Depot Encouraging Employees to Lie?

Posted on by chase

When I set my various news programs to send me alerts relating to Office Depot, I had no idea just how deep the rabbit hole would go. Originally I want to keep tabs on the ongoing investigations into their alleged misconduct over government sales (which I also just learned extends to the GSA, the Defense Department and other high-level federal contracts), but I keep finding more and more horror stories from employees about the way the company does business. By way of LaptopMag’s blog:

“I have had various managers (including my store manager) insinuate, if not flat-out tell me, not to sell items to customers if they aren’t going to get any attachments … The managers would much rather us sell 3 laptops, a PPP, TDS, and case than a hundred laptops with nothing.”

The PPP mentioned there is the Product Protection Plan, an add-on warranty offered by Office Depot, and TDS is “Tech Depot Service”, an Office Depot-supplied tech support program. Since the likelihood of these services being actually “cashed in” is low, they’re a popular way for big-box retailers to pad their profit margins.

Selling a product that may not have a lot of value isn’t a crime, though; people have the right to buy or not buy whatever they want. However, misleading or misinforming people about what you’re offering them is not only bad business, the FTC has stated it violates federal law. Once again, it comes back to doing business with a company you trust. When you can plug your local company’s name into Google and come up with dozens of results featuring “fraud”, “lying”, “theft” and “criminal investigation”, it’s probably time to look elsewhere.

Meanwhile, check out LaptopMag’s series of articles. The first one they did about Office Depot Employees lying about notebook stock sparked an internal Office Depot memo and caused many employees to come forward to be quoted in the current article, which alleges changing price tags with photoshopped duplicates, “folding in” the price of warranties and other add-ons into clearance items, and more. It’s amazing that all this is going on in the face of their other criminal investigation. Kind of makes you glad you can shop online, eh?

Big Box Watch: Berkeley joins in Office Depot allegations

Posted on by chase

Continuing the drama surrounding Office Depot’s alleged misconduct in dealing with state and local governments, the Director of Finance for the City of Berkeley, Robert Hicks, says the Office Depot company has overcharged the city by as much as a quarter of a million dollars during the course of a three-year, $550,000-a-year contract to provide miscellaneous office supplies and recycled copy paper to the city. According to the Berkeley Daily Planet:

Hicks’ revelation supported the allegations first made to the City Council last October by Diane Griffin, president of Radston’s Office Plus supply store of Hercules and a member of the board of directors of the Nation-al Office Products Alliance (NOPA).

According to the conclusion of an analysis of more than 100 pages of the Office Depot-City of Berkeley contract provided to the city by Griffin, Office Depot charged the normal retail price on 135 of what it called “core” office supplies, but promised a 55 percent discount to the city for items not on the “core item” list. Griffin says that in fact, Berkeley received only a 39.7 percent discount on those non-core items, the basis for her estimate of the $250,000 overcharge.

Hicks has also stated that his office will look into the dealings with Office Depot outside of the contract mentioned above, and that the actual amount of alleged overcharge may reach even more than $250,000. Diane Griffin herself said she believes the Office Depot overcharges on its City of Berkeley contract are accumulating at a rate of $8,000 a month.

The more I dig into these Office Depot allegations, the more bewildered I am by their apparent conduct. They go and offer people a ridiculous contract that no one could possibly match, and then not only charge way more than they promised but also, in some cases, far more than retail price. There’s a lesson to be learned here: if it looks too good to be true, it probably is.