Office Depot Settles Fair Disclosure Case For $1 Million
Boca Raton, FL, United States (AHN) – Office Depot has agreed to pay $1 million to settle allegations that it violated fair disclosure laws in 2007.
The Boca Raton-based company was charged with selectively informing analysts and investors that it would not meet earnings estimates and of overstating earnings the same year because of accounting violations. It did not admit to guilt under the settlement, which also requires two executives to pay penalties.
According to the Securities and Exchange Commission, chief executive officer Stephen Odland and then-chief financial officer Patricia McKay “discussed how to encourage analysts to revisit their analysis of the company” as the second quarter of 2007 ended. The company then made one-on-one calls to its largest shareholders and analysts, who subsequently lowered their estimates for the period.
Office Depot did not directly tell analysts that it would not meet expectations but made references to statements of other companies about the effects of the weak economy on earnings. The calls, which the SEC said were uncommon, provided selected investors with an unfair advantage.
Odland had proposed that Office Depot also refer to their own prior statements in their calls. The SEC said McKay then guided the company’s investor relations employees to prepare talking points. The two executives have agreed to pay $50,000 each without admitting to any wrongdoing.
Accounting violations unrelated to the alleged disclosures to analysts also led Office Depot to overstate earnings in financial statements for the third quarter of 2006 through the second quarter of the next year. The company restated its earnings in November 2007.
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