Office Depot to pay $1 million fine to settle with the SEC

By Palm Beach Business.com

BOCA RATON — Office Depot has agreed to pay a $1 million fine to settle allegations brought by the Securities and Exchange Commission that it disclosed certain earnings data to select analysts and institutional investors instead of making the numbers public.

Also part of the suit, filed Thursday in federal court in South Florida, the SEC charged that Office Depot inflated earnings by $30 million in quarterly reports filed in 2006 and 2007.
In settling the suit, Office Depot did not admit to or deny the SEC’s allegations.

In separate but related proceedings, Office Depot CEO Steve Odland and former Chief Financial Officer Patricia McKay each agreed to pay $50,000 in civil fines to settle allegations with the SEC.

In 2007, faced with declining profit as the economy slowed, Office Depot executives made phone calls to the stock analysts signaling to them but not directly stating that earnings would fall short of analyst estimates, according to the SEC.

Office Depot could have issued a press release on the matter but chose not to, according to the SEC, because the company's work on the numbers was incomplete. Instead, Odland and McKay agreed to "talk down" the analysts, who in turn ultimately lowered their earnings projections for the company.

Six days later, Office Depot filed a report with the SEC disclosing the new earnings projections. Under federal securities laws, Office Depot should have made the report “promptly,” meaning within 24 hours.

Office Depot's stock closed trading Thursday at $4.65, down 4 cents. The company is set to release third quater numbers next Wednesday.